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The distinct signaling effects of R&D subsidy and non-R&D subsidy on IPO performance of IT entrepreneurial firms in China

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  • Chen, Jin
  • Heng, Cheng Suang
  • Tan, Bernard C.Y.
  • Lin, Zhijie

Abstract

This study investigates how R&D subsidy and non-R&D subsidy affect entrepreneurial firms’ initial public offering (IPO) performance in an emerging economy like China. Analyzing data from 269 IT (information technology) entrepreneurial firms in China, we found that R&D subsidy has an inverted U-shape effect on IPO performance, while non-R&D subsidy has a positive effect on IPO performance. Furthermore, both state ownership and patent intensity moderate the inverted U-shape relationship between R&D subsidy and IPO performance. In contrast, neither of them moderates the positive relationship between non-R&D subsidy and IPO performance. These findings contribute to the literature on the effectiveness of government subsidy by highlighting the symbolic effect of government subsidy on external financing in emerging economies, and offer important practical implications to entrepreneurial firms and government funding agencies in China.

Suggested Citation

  • Chen, Jin & Heng, Cheng Suang & Tan, Bernard C.Y. & Lin, Zhijie, 2018. "The distinct signaling effects of R&D subsidy and non-R&D subsidy on IPO performance of IT entrepreneurial firms in China," Research Policy, Elsevier, vol. 47(1), pages 108-120.
    • Handle: RePEc:eee:respol:v:47:y:2018:i:1:p:108-120
    DOI: 10.1016/j.respol.2017.10.004
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    More about this item

    Keywords

    G32; H2; O32; O38; signaling effect; R&D subsidy; non-R&D subsidy; state ownership; patent intensity; IPO performance;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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