The Influence Of Government Subsidy And Protection Of Intellectual Property On Firm R&D Investment

In this paper we focus on the influence of intellectual property protection, government subsidy and their synergy effect on the R&D investment of enterprises. As to government subsidy, the recent empirical research, using economic data, come up with three different conclusions which are, first, that subsidy stimulate investment of enterprises, second, subsidy restrain investment of enterprises, and third, they don‘t have notable relations. It‘s known that the investment decisions that a firm made always have strong relations with the environment it is in, but the effect of the environment is barely considered in most researches, which also can‘t give the conditions under which government subsidy may have these three effects mentioned above. This paper introduce intellectual property protection as a measure of the environment and try to find out how the subsidy affect the process that a firm make its decisions on R&D investment under different environment.First, based on the AJ model, we constructed an improved model to portray the process that a firm make its decisions on R&D investment. We add the factor of government subsidy into our model. We solve the game model to find out the optimum solution, which shows that there exist two different patterns firms will follow when they make decision about R&D investment. Accordingly, we divide the enterprises into two kinds which are high-tech industry and traditional industry according to the numerical characteristics of the parameters. And the reflection of firms to government subsidy and intellectual protection differ between the two kinds of enterprises. Our model give an explanation of why the three different kinds of effects mentioned above exist.Second, we construct an econometric model using the empirical data to have a test of our conclusion from the game model, and the result shows strongly support. As to the data of recent 9 years, intellectual property protection(IPP) stimulate the R&D investment of firms in both two kinds of industry. In the traditional industry, Government subsidy generate some negative effects when IPP is weak, which partly neutralize the stimulating effect on the firm R&D investment, while government subsidy stimulate the firm R&D investment when IPP is strong, furthermore, government subsidy has a notable positive synergy effect with IPP on firm R&D investment. In the high-tech industry, government subsidy stimulate firm R&D investment no matter IPP is weak or strong, and different from traditional industry, government subsidy and IPP don‘t have a notable synergy effect. Through the study we confirm that the influence of government subsidy on firm R&D investment is affect by the characteristic of firm and the level of intellectual property protection.According to the result of the game model and the empirical research, we find out valuable principles for government when making policies of R&D subsidy and intellectual property protection aiming at promoting the firm R&D investment, on which we can clearly know how the policy will affect the enterprises.