The importance of large firms for generating economic value from subsidized technological innovation: A regional perspective

Abstract

This study investigates the relationship between government subsidies and the commercial value obtained from a region's scientific and technological achievements, and argues that this relationship will depend on the average size of the firms present in that region. Using panel data on the high-tech industry in 27 provinces and autonomous regions in China from 2009 to 2019, we show that government subsidies have a significant double threshold effect on the commercial/economic value obtained from scientific and technological achievements. When the average size of enterprises in a region is small, government subsidies have a negligible effect on the commercial/economic value obtained from technological innovation. As the average firm size reaches a first threshold value, the impact of government subsidies becomes significant and positive. This impact increases further when the average firm size in a region exceeds a second threshold value. These findings improve our understanding of the role of government subsidies for the commercialization stage of the technological innovation process and have important implications for policy makers.