Impact of the InnoCom program on corporate innovation performance in China: Evidence from Shanghai

Abstract

Based on the data from the Shanghai Science and Technology Enterprises survey 2011 to 2015, this paper evaluates how the InnoCom program of stimulating corporate research and development (R&D) implemented in China affects the innovation performance of beneficiary firms from both theoretical and empirical perspectives. We first develop a unified framework considering innovation inputs, absorptive capacity and innovation outputs. Then, we explore the mechanism by which companies with evaluation scores exceeding a certain threshold are more likely to be certified as high and new technology enterprises that qualify for the InnoCom program, and use a fuzzy regression discontinuity design to test whether the policy increases internal R&D inputs, profit, and the number of independent intellectual property rights. After correcting for potential endogeneity problems, the result confirms a positive, significant, and lasting impact of the InnoCom program on high-tech income and the number of intellectual property rights. Meanwhile, there is no significant impact on immediate corporate innovation investment, which suggests a crowding-out effect of government direct subsidies on a company's internal innovation investment. These conclusions are further confirmed by robustness tests. Our findings will help the government understand implementation effect of innovation policies and support them seeking to formulate more effective innovation strategies.