The effects of EU grants on SMEs: Evidence from Bulgaria

• Published in: Economic systems 2024-06, p.101244, Article 101244
• Main Authors: Nigohosyan, Daniel, Vassileva, Iglika, Vutsova, Albena
• Format: Article
• Language: English
• Subjects: Difference-in-differences; EU grant schemes; Impact evaluation; Propensity score matching; SME support
• ISSN: 0939-3625
• DOI: 10.1016/j.ecosys.2024.101244

The paper explores the effects of European Union (EU) support on small and medium-sized enterprises (SMEs) in Bulgaria in the 2014–2020 programming period. In particular, it applies two standard counterfactual techniques (Difference-in-Differences and Propensity Score Matching) to review a 200-million EUR scheme under the Operational Programme ‘Innovation and Competitiveness’ (2014–2020). The analysis shows a positive and statistically significant effect of the grants on the assets of the supported companies. Some positive effects on the SMEs' revenues and revenues per employee have also been observed. However, the paper finds no evidence that the SME grants have supported the companies' profitability and employment. Thus, the findings raise questions about the design of grant schemes supporting competitiveness, which may lead to selecting better-performing companies (‘cherry-picking’) without providing any substantial positive effects. •The research employs two counterfactual techniques, Difference-in-Differences and PSM for the first time to assess the effects of EU-grant support on SMEs in Bulgaria.•The paper contributes to the ongoing discourse on the effectiveness of grant schemes for competitiveness.•The results suggest concludes that better-performing companies are selected without yielding substantial positive outcomes in terms of profitability, employment, and labour productivity.