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The Effects Of Local Government Behavior On Innovation Under Decentralization Background

Posted on:2013-10-09Degree:DoctorType:Dissertation
Country:ChinaCandidate:Y Y GuFull Text:PDF
GTID:1226330434975599Subject:Theoretical Economics
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China has experienced30years of rapid economic growth, while not a world brand, not an innovation which can influence the world, and companies are always at the low end of the value chain. All of this has become a bottleneck for China’s sustainable development. So, what institutional system hinders our innovation? In transition period, the progressive reforms of decentralization formed the main pattern which the local governments promote economic growth. The local governments play an important role in China’s economic growth. The enthusiasm of local governments to actively develop the local economy has contributed to the30-year economic growth miracle under fiscal decentralization and political championships, but it also brings a number of questions. Under fiscal system, official incentive system and judicial system, this article reserches the effects of the behavior of the local government on business innovation inputs and outputs. It studies on the following questions:First, we research the reason of insufficient R&D investment from the perspective of official encourage. This chapter studies how the competition for promotion and fiscal decentralization affect government R&D subsidy under governance structure. We put government R&D subsidy and legal environment into enterprise decision model to seek the reason of inadequate corporate R&D investment. We find that traditional promotion competition which takes GDP as the assessment criteria significantly reduced the government R&D subsidy. Fiscal expenditure decentralization has a significant negative effect on government R&D subsidies, while fiscal revenue decentralization has a positive effect, but not significantly. Combination of competition for promotion and fiscal decentralization reduce the quantity of government R&D subsidy significantly, and then lower corporate R&D investment. We also find that anti-corruption activities will improve the legal environment and reduce rent-seeking behaviors which will increase corporate R&D investment.Second, we deepen the reasons of inadequate corporate R&D investment from the rent-seeking perspective on the basis of the previous chapter. This chapter expands the aid-in-enterprise model, studies the effect of rent-seeking on enterprise R&D input, and empirical tests the efficiency lost by using Chinese provincial panel data from a business perspective and social perspective. The estimation results show that anti-corruption activities which reduce rent-seeking behaviors significantly increase R&D investment. This chapter also shows that R&D subsidy negatively affects enterprise yields, number of patents, taxation and economic growth which reflect the low efficiency of R&D policy. The conclusion has important policy implication for improving efficiency of R&D subsidy.Third, to test the impact of local government actions on innovation output, we study the development zone as the carrier. Do development zones which formed under the local government have spillover effects and become the innovation corner, or just be an image project for local officials to seek promotion? This chapter examines the innovation performance of52hi-tech development zones, and compares performance before and after2003. Empirical studies show that local government intervention in industrial clusters indeed plays a positive role in industrial innovation in the context of lack of capital investment and market system in China. However, development zones lack clusters mechanisms and spillover effects, and don’t have positive impact on the local innovation.Last, the study is specific to the individual local officials, and we examine the effect of officials’personal characteristics on regional innovation input and output. Values and individual preferences of local officials play an important role in local innovation performance in the process of reform and development. A growing number of regional innovation models highlight the effect of innovative spirit on innovation. This chapter takes the listed companies in the SME board as the sample based on the prefecture-level cities in Yangtze River Delta and Pearl River Delta, and views the entrepreneurial background, age and education of officials as the spirit’s proxy variable to study the effect of innovation spirit on R&D input at micro level. The regression shows that local officials’spirit of innovation has significantly promoted R&D input. From the macro-level perspective, this paper takes the number of small business as the proxy variable to study the effect of innovation spirit on output. The conclusions provide some inspiration on the selection and training of local officials.This paper reviews the positive and negative effect of the local government behavior on innovation through the study of the above four questions. Our conclusion is that local government created a30-year growth miracle under the decentralized system, but it also solidified the growth path which relies on the number of factor inputs rather than technological innovation. It is true that our conclusion is not to abandon the decentralized system, but to reform the factors of current system which is not conducive to economic development healthly and sustainably. We must accelerate the transformation of local government, and form an effective institutional framework to promote technological innovation.
Keywords/Search Tags:Fiscal Decentralization, Political Incentives, Rent-seeking, InnovationInvestment, Innovation Output
PDF Full Text Request
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