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Spillovers of innovation subsidies on regional industry growth: Evidence from China

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  • Guo, Yan
  • Zhang, Haochen

Abstract

Spillover is an important channel through which government innovation policies boost economic growth. Despite various firm-level analyses on the effectiveness of innovation subsidies, industry-level spillovers of such subsidies and determinants of their strength are not well-studied. Based on the sample of all the subsidized manufacturing and service industries in the Innovation Fund for Small and Medium Technology-based Firms (Innofund) program from 1999 to 2014, we examine the spillover effects of innovation subsidies and explore rich heterogeneities across regions and industries. We find significantly positive spillover effects of the innovation subsidies on the subsidized industries and their upstream and downstream industries regarding the firm number, employment and output growth. Furthermore, we find large vertical spillovers of subsidies from high-tech service sectors to manufacturing sectors for the first time. The spillovers work through market linkages, strengthened by marketization, decentralized governance, and interactions between different techno-industrial policies.

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  • Guo, Yan & Zhang, Haochen, 2022. "Spillovers of innovation subsidies on regional industry growth: Evidence from China," Economic Modelling, Elsevier, vol. 112(C).
    • Handle: RePEc:eee:ecmode:v:112:y:2022:i:c:s0264999322001158
    DOI: 10.1016/j.econmod.2022.105869
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    3. Xin Ma & Hong Jiang & Lijuan Tong & Jingyi Zhang & Mengyuan Dong, 2023. "Sustainability of the New Energy Automobile Industry: Examining the Relationship among Government Subsidies, R&D Intensity, and Innovation Performance," Sustainability, MDPI, vol. 15(20), pages 1-16, October.
    4. Xin Dai & Jie Tang & Qin Huang & Wenyue Cui, 2023. "Knowledge Spillover and Spatial Innovation Growth: Evidence from China’s Yangtze River Delta," Sustainability, MDPI, vol. 15(19), pages 1-26, September.
    5. Kumbhakar, Subal C. & Li, Mingyang & Lien, Gudbrand, 2023. "Do subsidies matter in productivity and profitability changes?," Economic Modelling, Elsevier, vol. 123(C).

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    More about this item

    Keywords

    Innovation subsidy; Market spillover; Vertical linkages; Economic growth; Governance;
    All these keywords.

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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