The Impact Of Government R&D Subsidies On Firms’ Performance

This thesis selects Chinese bio-pharmaceutical listed companies as thestudy in sample. Based on theoretical analysis and literature reviewing, thisthesis builds an empirical model to examine the correlation betweengovernment subsidies and firms’ R&D investment as well as the correlationbetween R&D investment and firms’ performance. This thesis use thefirm-level panel data with a sample of28Chinese bio-pharmaceutical listedcompanies from2007to2011. The following facts are confirmed through theempirical tests:(1) For bio-pharmaceutical listed companies in China,government subsidies are positively related to firms’ R&D investment;(2)This term’s expenditure is not closely related previous term’s expenditure,andfirm size is not a decisive factor of R&D expenditure;(3) R&D investmentintensity has a slight positive effect on current firms performance. In the longrun, due to time-lag effect, R&D investment could increase firms’profitability and improve firm’s performance more significantly. Based on the previous empirical results, policy recommendations areoffered:(1) Government should continue to pour money into developing thebio-pharmaceutical industry;(2) Improve IPR (intellectual property right)protection system in China;(3) Diversify financing sources for bio--pharmaceutical companies, developing debt, equity and venture capitalmarket;(4) Bio-pharmaceutical companies should make concerted efforts toattract innovative personnels and push for international cooperation with theworld’s first-class bio-pharmaceutical companies and research organizations.