Abstract
Governments design and implement policies to achieve a variety of goals, but perhaps none are as pressing as shifting national economies away from non-renewable fuels and towards more sustainable, environmentally-friendly technologies. To incentivize such transitions, governments provide subsidies to private and public companies to innovate, i.e., to engage in research and development (R&D) to develop those technologies. However, the question of the companies is using government subsidies (GS) to perform R&D and its answer determines the effectiveness of government policies. Consequently, this paper seeks to answer this question through investigating Chinese lithium-ion battery (LiB) firms and the GS they receive through novel usage of information flow (IF). Hausman tests, fixed- and random-effects models confirmed a weak, though positive correlation between GS and R&D as determined by patent output (PO), but interestingly, observations of IF intimated that GS also affected other variables such as net profit (NP) and main business income (MBI). This suggests that firms are being awarded GS for higher PO, but a corresponding increase in R&D and its expected growth in company performance is not occurring. Thus, it is suggested that performance variables other than PO be used as firms may ab (use) this metric to apply for more GS, rather than performing R&D that leads to technological breakthroughs.
Highlights
The problem of global warming and associated pollution is multifaceted but is being addressed most prominently from the perspective of first minimizing and eliminating the need for fossil fuels and is manifested by changing human behavior on both supply and demand sides for energy and transportation
Solar and wind energy technologies have already began displacing the usage of fossil fuels and are feeding electricity into grids on an ever-increasing scale and pace [1,2,3,4], as they are inherently intermittent, energy storage for when the sun is not shining, or the wind is not blowing remains a critical bottleneck in wider scale adoption
This indicates that lithium-ion battery (LiB) enterprise research and development (RD) investment is positively correlated with company size
Summary
The problem of global warming and associated pollution is multifaceted but is being addressed most prominently from the perspective of first minimizing and eliminating the need for fossil fuels and is manifested by changing human behavior on both supply and demand sides for energy and transportation. Lithium-ion batteries (LiBs) have emerged as a crucial technology to further renewable energy development [5,6,7] and serve to stabilize electrical grids [8,9,10,11,12] but are highly desirable for the automotive industry promoting a new generation of electric vehicles (EVs) [13,14] How to motivate such changes in behavior, whether achieved through reward or punishment (i.e., carrot and stick approaches), is a fundamental problem in economics and government policies [15,16,17]. What is perhaps not well understood is the answer to the question of does GS motivate companies to invest more in innovation and the development of high-quality products, or does GS motivate companies to neglect actual innovation in favor of using acquired funds to perform other activities? This naturally leads to the question onto the actual effectiveness in GS in stimulating corporate innovation
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