An Inverted U-shaped Relationship? The Impact of Government Subsidies on the R&D Investment of New Energy Companies: Economic Policy Uncertainty and Enterprise Heterogeneity Perspectives

Abstract

The government is actively pursuing a financial subsidy policy to assist new energy companies in strengthening their ability to innovate independently, but the impact of government subsidies has been contentious. Using 142 new energy listed companies in Shanghai and Shenzhen A-stocks from 2012 to 2018, a fixed-effect model was used to examine the impact of government subsidies on new energy companies’ R&D investment, as well as the changes in the relationship between the two under conditions of economic policy uncertainty and enterprise heterogeneity. The results indicate that government subsidies have an inverted U-shaped effect on enterprise R&D investment; that is, while appropriate subsidies promote enterprise R&D investment, excessive subsidies suffocate other funds invested by the company in R&D and exacerbate the company’s proclivity to invest in fixed assets. Furthermore, economic policy uncertainty has a more substantial negative adjustment effect on the relationship between government subsidies and corporate R&D investment than fixed-asset investment. Additionally, research indicates that in China’s eastern coastal regions, the impact of government subsidies on R&D investment is more remarkable for high-risk preference enterprises and non-state-owned enterprises than in the central and western regions, where the negative adjustment effect of economic policy uncertainty is more remarkable for low-risk-preference and non-state-owned enterprises. It is recommended that government departments ensure economic policy stability and continuity and that subsidy selection be more targeted and precise in determining subsidy funds.