Abstract
Developing wind energy is one of the win win measures in response to climate changes and energy security. In order to promote technical innovation in the wind-energy industry, the government grants various fiscal subsidies to wind-energy companies every year. To acquire these subsidies, enterprises often employ those with political backgrounds as members of the board of directors and board of supervisors. On the one hand, the acquisition of subsidies may indeed promote the technical innovation capacity of enterprises, but, on the other hand, due to the existence of “the grabbing hand”, the technical innovation capacity of enterprises may be weakened. We selected 35 Chinese wind-energy listed companies to analyze the relationship between political connections, subsidies and the technical innovation capacity. Results indicate that, political connections to an enterprise weaken its innovative potential and achievement. Moreover, the higher the strength of political connections is, the stronger the negative impact it will bring to the innovative capacity of the enterprise. Modulation of government subsidies, however, can alleviate the negative effects of political connections.
Highlights
Energy is an important input related to economic development and national defense security
This illustrates that, the existence of enterprises having political connections restrains research and development (R&D) funding in enterprises, which results in underinvestment in innovation, and impairs the innovative potential of enterprises
No matter whether consideration is given to the interaction effect between political connections and subsidies, when other conditions remain unchanged, the strength of the political connections of enterprises was negatively related with both research and development input and patent applications
Summary
Energy is an important input related to economic development and national defense security. According to the official data of the Ministry of Finance, nationally, the total value had been collected from renewable power plus amounted to about RMB 70 billion. This sum of money is used as subsidies for the renewable energy industry. Such clean energy includes biomass power generation, wind power and solar energy. In their actual operations, enterprises often employ those with political backgrounds as members of the board of directors and supervisors, so as to acquire additional government subsidies. The results provide policy implications for the innovative development of enterprises, on the one hand, and provide a decision-making reference for the subsidy policies on the other
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