Research on Effectiveness of the Government R&D Subsidies: Evidence from Large and Medium Enterprises in China

Xindong Zhang, Junjun Wu

School of Economics and Management, Shanxi University, Taiyuan, China.

DOI: 10.4236/ajibm.2014.49056                

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.

Keywords

China, Government R&D Subsidies, R&D Capacity, Innovative Performance

Conflicts of Interest

The authors declare no conflicts of interest.

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