Firms use R&D subsidies and tax incentives differently based on their financial situation and how they protect their intellectual property. Small businesses with financial constraints are more likely to get subsidies than tax credits. Small businesses that protect their intellectual property are more likely to use tax incentives. Previous experience in R&D increases the likelihood of using tax incentives. Subsidies may be better for small businesses than tax credits. Overall, subsidies and tax credits may work best together to support R&D.