Government R&D Subsidies, Firm’s R&D Capacity And Innovative Performance

Innovation is not only the soul of a nation’s progress, but also the inexhaustible force of a country’s prosperity. Along with the globalization of knowledge economy, we must enhance the capability of independent innovation and change the economic growth pattern to become a hignly innovative country. As we step into the 21 st century, China has entered a new historical stage to rely on more technology and innovation to the achievement of sustainable economic development. And the key to increase our independent innovation capacity is to strengthen the dominant position of enterprise. So we must build a business-oriented, market-oriented and government-led innovation system. Research and development (R&D) is a kind of innovation activities, which is the inherent power and fundamental guarantee for a firm’s sustainable development. In order to make the enterprises truly become the main body in technological progress and innovation, governments around the world attach great importance to firm’s R&D activities and they make related policy and funding support for firms. The government R&D subsidy is one of the main policy instruments to encourage innovation.Nowadays, our country is in the period of industrial transformation and government has constantly intensified its support for science and technology. Also our firms have generally raised the awareness of innovation. Especially, the GEM listing corporation is the representative of our small and medium-sized high-tech enterprises. There are highly value to study government R&D subsidies, firm’s R&D capacity and innovative performance of GEM, which can not only provide some empirical supplement on the micro-level, but also provide a useful reference to improve the efficiency of government R&D subsidies. The purpose of this paper is to answer the question:whether the government R&D subsidies will improve the firm’s innovative performance. Whether a firm’s own R&D capacity will moderate the relationship between government R&D subsidies and firm’s innovative performance. Because the data of firm’s government R&D subsidy is not easy to get, the related literature is relatively less. The innovation of this paper is the manual data collection and analyzes how the government R&D subsidies affect the firm’s innovative performance, and how a firm’s own R&D capacity will moderate the relationship between government R&D subsidies and firm’s innovative performance.Based on reading a large number of professional literatures, this paper detailing introduced the related research on the relationship among the government R&D subsidies, firm’s R&D capacity and firm’s innovative performance. And then put forward three research hypothesis and some empirical tests. Finally draw the conclusion and policy recommendations.The findings suggest that the firms that received increasing government R&D subsidies will have a better innovative performance, yet up to a point. Beyond this threshold, a greater share of government R&D subsidy will reduce a firm’s innovative performance. And such substitution effect is larger for firms with greater R&D capacity.