The Effect Of Policy Subsidy On OFDI Firms' New Product Innovation

Innovation is the key of shaking off the low-end in the value chain and promoting Chinese product.Innovation also is a driving force to upgrading industry and reforming the economic system as well as becoming a creative society.As a carrier of economic development,multinationals bear an important responsibility of integrating resource,technology and labor between domestic and abroad.On the other hand facing the challenges that innovation is high-cost,risky and long return cycle,government has so many good initiatives and incentives to seed and encourage innovation,For example policy subsidy.So this study is about policy subsidy and multinationals innovation from theoretical and empirical research.Content of research includes: Evolutionary game analysis about government subsidy regulation and multinationals innovation,Policy evaluation of direct subsidy,Subsidy funds allocation problem,the relationship about indirect subsidy and innovation in host country.In recent years,the government began to strengthen subsidy management because of the exposure of many “cheat fill door”.This study is based on diverse regulation model of government subsidy management and innovation.According to the situation of Chinese multinationals innovation build evolutionary game about penalty,regulation of success rate and the third party report.The model conclusion shows that there are five stability strategies between local government and multinationals.Penalty,regulation of success rate and the third party report determine multinationals adapt the proportion of innovation strategies and avoiding the cheating strategies.This model brings enlightenment to government is that to avoiding cheat subsidy incident happens,government need to adapt different strategies according to the transition phase.The direct-subsidy-policy assessment is very important to make up loopholes and stimulate multinationals' innovation.This study systematically evaluates the micro effect of policy subsidy on OFDI firms' new product innovation based on China OFDI database.The empirical study shows that,policy subsidy brings negative effect on OFDI firms' new product innovation significantly,while subsidy does not work for resource-intensive OFDI firms significantly but non-resource-intensive do not.On the other hand policy subsidies promote the innovation capability on high-tech multinational companies sample but not non-high-tech sample significantly.This discovery brings enlightenment to government is that scientific and reasonable direct-subsidy-policy assessment is a long-term program about fund allowance to avoiding to wasting limited financial resources.Based on the database about Chinese OFDI on 1998-2007,the further study found that the effect of policy subsidy on OFDI firms' new product innovation exist the double threshold effect.In practical terms,there is a moderate interval of subsidy intensity.When the subsidy intensity is out of the moderate interval,and no effect of policy subsidy on firms' new product innovation,this paper has important implications for subsidy policy adjustments,that is previous setting quotas for subsidies need to adjust,for stimulating the OFDI firms' innovation,the policy subsidy is needed in the innovation moderate interval.Multinationals' innovation is periodicity.So do policy subsidy's incentive function changes as the different innovation stage? this study adapts quantile-regression discussed the problem of the periodicity multinationals' innovation.The results show that the policy subsidy affect the Multinationals' innovation according to the stage of innovation level and effect is decreased.Further division of the sample according to investment mode found subsidy affected the multinationals' innovation that adapted merger-acquisition investment mode significantly on high-stage innovation level,affected the Multinationals' innovation that adapted Greenfield investment mode significantly on low-stage innovation level.This paper has important implications for subsidy policy that government needs to give the policy subsidies by the periodicity innovation.Preferential royalty taxation is an important tax which affects multinationals' innovation.And also stimulate the technology diffusion in host country.Based on the database about Chinese OFDI on 2000-2007 and the data base about Chinese administration of taxation we study the relationship about indirect subsidy mode and multinationals' innovation.The empirical study found that generally speaking preferential royalty taxation reduced the multinationals' innovation significantly but had no effect on multinationals' R&D investment.Using the political connection(PC)variables and then measure how the PC to affect the multinationals' R&D investment and innovation.The conclusion found that PC reduced the effect of preferential royalty taxation on multinationals' R&D investment and innovation.This discovery brings enlightenment to government is that the out-foreign direct investment(OFDI)is not a paradise of avoiding tax and a duplication of production development mode.Chinese multinationals need to apply domestic and abroad resource,policy of preferential taxation reasonably.