Abstract
To cope with the fast-changing business environment, Chinese government makes every effort to increase business R&D subsidies. The aim of this paper is to examine the efficiency of Chinese government R&D subsidies on innovative performance and the moderating role of a firm’s R&D capacity. Based on the data from Chinese Large and Medium Firms during 1997-2012, we analyze whether government R&D subsidies affect a firm’s innovative performance, as well as how this effect works. The findings suggest that the firms that received increasing government R&D subsidies will have a better innovative performance, yet up to a point. Beyond this threshold, a greater share of government R&D subsidy will reduce a firm’s innovative performance. And such substitution effect is larger for firms with greater R&D capacity. Also, the firm’s own R&D capacity, size, industry technical levels have varying degrees of impact on the efficiency of government R&D subsidies. The findings of this paper may have practical value and help governments to develop relative regulations and policies.
Highlights
The firm becomes strong and a country will be strong
China has begun to implement the strategy of rejuvenating a country through science and technology since mid-1990s and attached great importance to crea
Based on the above analysis, this paper further examines the influence of these factors to the effect of government R&D subsidies, which will provide some references to formulate R&D subsidy policies
Summary
Whether we can build an upgraded version of our economic development, from “Made in China” to “Created in China”, to achieve sustainable development, largely depends on the creativity of firms. China has begun to implement the strategy of rejuvenating a country through science and technology since mid-1990s and attached great importance to crea-. How to cite this paper: Zhang, X.D. and Wu, J.J. (2014) Research on Effectiveness of the Government R&D Subsidies: Evidence from Large and Medium Enterprises in China. Our governments consider financial R&D subsidies for firms as the most significant strategy to stimulate firms’ independent innovation. The growing government subsidies have attracted much attention
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