Abstract
Private enterprises play an increasingly important role in China. They can improve the total-factor productivity (TFP) and help transform and upgrade industrial structures. This study uses data for private listed manufacturing companies from 2009 to 2017 to examine the effects of different types of subsidies on TFP. We also analyze the heterogeneity and specific mechanism of subsidy effects. We find that R&D subsidies and production subsidies positively affect private enterprises’ TFP. Moreover, R&D subsidies and production subsidies lagged by one period can also significantly increase private enterprises’ TFP. In terms of industry, R&D subsidies have more obvious effects on technology-intensive industries, while production subsidies have more significant effects on labor-intensive and capital-intensive industries. In terms of scale, R&D subsidies’ effects on the TFP of medium-sized enterprises are the largest, while production subsidies have the greatest effect on small enterprises’ TFP. Government subsidies increase private enterprises’ TFP through two mechanisms: improving technological innovation capability and alleviating financing constraints. Our results suggest that governments should formulate different subsidy policies according to industry and enterprise scale.
Highlights
China’s rapid economic growth has had serious consequences in terms of resource consumption and environmental impact
80% of patent applications are made by private enterprises, among which more than 60% are invention patents, while new-product provision accounts for about 70% [1]
Based on the above theoretical analysis, we found that the effects of R&D subsidies and production subsidies on total-factor productivity (TFP), as well as the specific mechanisms of action, are quite different
Summary
China’s rapid economic growth has had serious consequences in terms of resource consumption and environmental impact. The effect of different government subsidies on total-factor productivity improving TFP. Improving the productivity and innovation of private enterprises is important and is a topic of concern to both researchers and the government. Previous studies have mainly investigated the effects of government subsidies on enterprises’ TFP in terms of financing constraints, innovation incentives, and signaling effects [6,8,9]. Previous studies have not examined subsidies’ effects on TFP in terms of different subsidy methods, which is a limitation of the existing literature. Using a sample of private listed companies in China, we examine the overall effects and heterogenous effects of different subsidies on enterprises’ TFP and further explore the mechanisms of different subsidies. We divide government subsidies into R&D and production subsidies and study their effects on private enterprises’ TFP.
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