Influence Of Government Subsidy On R&D Investment And Output Of Firms

At present,there have been rich literature on the relationship between government subsidies and corporate innovation capabilities.However,few research has covered the dynamic relationship between the two.In this paper,we take 155 companies which were listed on the China Growth Enterprise Market during 2009 & 2010 as the sample,to study the dynamic relationship between government subsidies,corporate R&D investment,innovation output as well as profitability by applying both static panel regression model and dynamic PVAR model.Furthermore,we step forward to more detailed analysis by separating different kinds of subsidies,firms of different industries and different regions.Through PVAR regression,impulse response analysis,and variance decomposition,it was found that(1)R&D subsidies have a significant longterm positive impact on driving companies to increase their R&D investment and achieve more innovations,and that the impact reached its peak in the 2nd to 3rd phases;(2)R&D subsidies first increased the R&D output,which in turn led to an increase in R&D investment and ultimately improved the profitability of the company;(3)non-R&D subsidies have no significant effect on the improvement of the enterprise's innovation capability;(4)R&D subsidies have a more significant boosting effect on the innovation performance of manufacturing companies;(5)Enterprises in the eastern region have stronger innovation capabilities;(6)The government will refer to enterprises' own investment and past R&D capabilities to subsidize.In addition,the ability of China's SMEs to transform their innovation outputs into market competitiveness remains to be improved.This article has enriched the dynamic research of the issue,and further explored the mechanism of government subsidies on corporate profitability.The conclusions have the following practical instructions: Governments should increase the subsidies for R&D projects,increase the R&D subsidies for manufacturing companies,and actively promote the integration of production,education and research to improve the efficiency of subsidies.For enterprises,increasing R&D investment and improving their own innovation capability are beneficial for obtaining government subsidies.