Government Subsidies Transmission Mechanism To High-tech Research And Development Firms

Independent research and development of new technology strategy is the need for national competition, firms need to continually invest in the high-tech research and development in order to maintain a competitive advantage in the market. However, R & D is of great uncertainty risk, and the initial investment required a lot of money, the government can not only make up funding gap caused by the great amount of early investment in R & D to a certain extent, but also reduces risk of new technology research and development by supplying a certain extent and manner of tax breaks or subsidies to research and development of firms.This paper analyzes, with the government subsidy policy, decision-making process and results of duopoly competition firms that take high-tech research and development. It includes the static analysis of decision-making process competitive firms under government subsidies; and extended analysis of business strategy when R & D subsidies have leaded to changes in market demand; Stackelberg dynamic game analysis of government and firms from the perspective of extended supply chain and considering the government performance. From policy to strategy choice and then to effect, the research progress represents a complete form of government subsidies transmission mechanism for competitive firms.This paper assumes that the implementation of government subsidies for the firms is given at the end of first year one-time and discount rate unchanged in the technology research and development cycle, based on which this paper sets up a model of the government subsidy transmission mechanism to R & D of competitive firms. According to the time value of money on the two firms, we make a discount calculation about the two enterprise’s profit. We analyze government subsidies policy transmission mechanism to high-tech research and development firm by comparing the results of market equilibrium. The results show that: competitive enterprises in government subsidy policies choose to research only when more profits will be got than non-research and development, and only the same investment of the two firms in research and development is a stable equilibrium, and with the increase of government subsidies rate, R & D investment of firms increase too and investment increased at an increasing rate; when R & D investment leads to changes in market demand , both increase or decrease of the profits are decided by the price elasticity of demand and R & D investment together, and when the price elasticity of demand of firm 2 is less than 1, the two firms profits can increase while firm 1 reduce R & D investment; considering the government performance, the government increases the subsidy rate can induce increased investment of firms, and both the largest utility of government and the largest profits firms increase to achieve a win-win situation.