Research On The Impact Of R&D Subsidies On Enterprise Technological Innovation

Economic theory identifies market failures,caused by knowledge spillovers,non-rivalry,nonexcludability,non-appropriability,and high risk of technology as public good characteristics,by capital market imperfections,any by patent system resulting knowledge diffusion gap between private and social return,which justify public R&D subsidy as a policy instrument to motivate firms to understake innovation activities in order to achieve higher and sustainable growth,but extensive empirical evaluation literatures yield ambivalent,mixed and inconclusive conclusions due to datasets,variables and measures used,empirical approach and models developed.Public R&D subsidy policy arising from contextual circumstance varies from countries and related corresponding institutions and resulted in heterogeneity of R&D subsidy policy per se.The effects of the same public R&D policy are different from individual country,firm and R&D subsidy program,respectively.Therefore,as one of important industrial policy instruments,there is no general pattern for R&D subsidy policy per se and must be adjusted based on local political,institutional and cultural environment of individual country.Under innovation-driven era and economic system reforming to ‘improve and enable market to play the decisive role in resource allocation and ensure government to play a better role',it is theoretical and practical significance to implement competition-based policy and coordination between competition policy and industrial policy in transition to modern economy of China and how to implement public support policy focusing on economically significant effects allocating R&D subsidy resources to impact on firm technological innovation.Based on CSMAR R&D subsidy sample from 2007 to 2018 for China listed manufacturing companies in China,this study empirically examines the effects of R&D subsidy on manufacturing enterprises in terms of impacting on firm R&D input and output and conditional factors to influence the effects,and impacting on firm performance and relevant influence mechanism of the effects.The results indicate that,firstly,R&D public subsidy significantly generate additional firm R&D expenditure measured by R&D intensity and R&D output measured by invention patent;secondly,it will have economically significant effects if allocating R&D subsidy to high type of innovative firms,and significant effects on firm R&D investment for large firms and on innovation output for small firms,and on firm both R&D input and output for sectors of high competition intensity,technology intensive and more financing constraints,in which enterprises to operate,and significant effects on firm R&D investment for state owned enterprises compared to non-state owned enterprises;Third,R&D subsidy significantly improves firm performance measured by ROA of profit ability;Forth,R&D subsidy improves firm productivity measured by total factor productivity.This study contributes to literatures of R&D subsidy on firm technological innovation.Firstly,new comprehensive framework.This study brings together firm internal organizational factors(innovative capabilities,firm size,and ownership),industrial organizational factors(sectors characteristics,and competition intensity),institutional and cultural factors(financing constraints)into proposed comprehensive framework to systematically analyze the effects of R&D subsidy on firm technological innovation and its conditional factors for the effectiveness.Hence,this study examines whether R&D subsidy to crowd in or crow out firm R&D investment while to explore the conditional factors to impact the effectiveness,which provides effectiveness evidence of R&D subsidy on firm technological innovation.Secondly,new analysis process.This study brings together R&D subsidy,firm R&D input,innovation output,productivity and firm performance into causation chain,thereby,from causation chain perspective,to evaluate R&D subsidy on firm technological innovation and whether transform R&D to productivity and finally improve firm performance,which explores and provides new insights of R&D subsidy impact on firm performance.Third,new supplement.This study provides supplemented empirical evaluation of R&D subsidy on firm performance.This study contributes to policy makers that the effects of R&D subsidy on firm technological innovation will be more economically significant if allocating to those firms which satisfy conditional factors influencing innovation,on the other hand,R&D subsidy should aim at improving the firms' capabilities to transform R&D into productivity gains and hence to the direction of circle loop by R&D subsidy-firm R&D input and output-TFP-performance-firm R&D investment and enable innovation as contribution factors for competitive market to be ever increasing.