Comparing Government Support, Firm Heterogeneity, and Inter-Firm Spillovers for Productivity Enhancement: Evidence from Korean Solar Energy Technology Industry

Abstract

Numerous issues, such as technological and market uncertainty, and financial role-players’ avoidance of long-run investment in renewable energy technologies, have deterred investments in innovation. Therefore, we investigate the direct and indirect (inter-firm spillover) effects of government support and firm heterogeneity on productivity. Using panel data concerning Korean solar energy technology manufacturers, the significance of firm heterogeneity in improving productivity is found. Specifically, the positive impact of physical capital and organizational slack on productivity in the short and long run, and the positive spillover effect of intellectual capital on productivity in the long run are established. Additionally, productivity increases only when government support interacts with firm heterogeneity. This increase relates to short- and long-run direct effects of the interaction between intellectual capital and non-R&D (Research and Development) subsidy, and organizational slack and R&D subsidy, and long-run spillover effect via the interaction between non-R&D subsidy and organizational slack. Lastly, for the solar energy technology industry, the policy and strategic repercussions for firm-level productivity enhancement are deliberated based on the findings of this study.