Public support, firm upgrading and spatial heterogeneity: Do financial instruments matter more than grants?

Abstract This paper examines whether public support is associated with firm employment size growth in territorially uneven ways across Czechia, with particular attention to differences between grants and financial instruments. Using administrative data for 206 micro-regions (ORPs), the analysis operationalises firm growth as the share of firms that moved into a higher employment size category between 2020 and 2025. Support intensity is measured separately for grant-based support and financial instruments and analysed through a three-step strategy combining global OLS models, geographically weighted regression, and within- versus between-region decomposition. The results show a stable positive association between financial instrument intensity and firm employment size growth, whereas grant intensity does not display a comparable aggregate relationship. Spatial analysis further indicates that these relationships are not geographically uniform. Financial instruments exhibit a more coherent and predominantly positive territorial pattern, while grants show stronger spatial instability and local sign reversals. Additional robustness checks suggest that the financial-instrument association operates primarily at the macro-regional scale rather than through variation among micro-regions within the same region. Taken together, the findings suggest that public-support instruments are embedded in broader regional development contexts and should not be evaluated solely through national average coefficients. The paper contributes to debates on place-based enterprise policy by showing that the relationship between business support and firm upgrading depends not only on instrument type but also on the territorial environments in which support is deployed.