The Impact Of Fiscal Subsidy And R&D Input On Enterprise’s Performance

After reforming and opening up almost forty years, Chinese economy has become the world’s second largest economy only inferior to the United States. In the process of economic development, as one of the government’s macro-control tool and a means to promote the transformation and upgrading financial subsidies have been used for long time. At the same time, through the observation of the developed economies, we can find that the developed economies have maintained a long-term investment and attention on R&D input in their histories. With the social and economic development, China’s R&D expenditure has also been increased. The fiscal and taxation system has played a more important role in supporting the development of science and technology innovation. National Bureau’s statistics data shows that the national R&D funding has grown to more than 1.4 trillion yuan in 2015, up 38.1 percent over 2012, an average annual increase of 11.4%. Converted by the exchange rate, China’s R&D funding has been surpassed Germany in 2010, and surpassed Japan in 2013. At present, Chinese R&D expenditure has become the world’s second largest after the United States.Increasing the breadth of financial subsidies and R&D investment, it is necessary and appropriate to give full attention on them. Therefore, this paper treats financial subsidies and R&D investment as two main objects of research and focuses on their effects on business performance. This paper mainly bases on externality, trade theory, technological innovation theory, the theory of factors of production and resource-based theory. Basing on Chinese industrial enterprise database, this paper empirically investigate the impact of fiscal subsidies and R&D input on business performance.This paper mainly includes:Firstly, the theoretical analysis and literature review of financial subsidies and R&D input; Secondly, detail research hypothesis, sort data, define and analyze variables; Thirdly, statistical description of the data, regression analysis about a series of models, and explanation about regression’s results; Fourthly, basing on the theoretical and empirical analysis, sum up the general and specific conclusions and propose appropriate policy recommendations.The main conclusions:for general business, financial subsidies, R & D investment could boost business performance, to provide financial subsidies to enterprises which have higher R&D investment will be more effective. The companies that have higher financial subsidies achieve a weaker performance than the companies that have lower financial subsidies. For different ownership, different regions and different sectors of the business, the impact of financial subsidies and R&D investment show diversity. The interaction between financial subsidies and R&D investment on corporate performance also has the diversity. Specifically, giving financial subsidies to private enterprises can achieve the best effect, foreign-funded enterprises can achieve best result if they increase R&D. giving enterprises subsidies which operate in the central and western regions can perform better. And if enterprises with higher R&D investment have been granted subsides, they can perform better too. About different sectors of enterprises, capital and technology-intensive enterprises can perform best if they are given financial subsidies.The main innovations of this paper include:research the impact of fiscal subsidies and R&D input on business performance simultaneously, and study the impact of fiscal subsidies and R&D interaction on corporate performance; the paper sets a suite of models to separate partial effects of financial subsidies and R&D investment, note the fallacy of single model estimation; the nature of ownership of enterprises, regional attributes and industry attributes are classified, set the corresponding dummy variables to estimate the impact of related character, avoiding the empirical regression fallacy of simple packet.