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The Impact of Government Subsidies on Private R&D and Firm Performance: Does Ownership Matter in China’s Manufacturing Industry?

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  • Zhenji Jin

    (Department of Management, Qingdao Agricultural University, Qingdao 266109, China)

  • Yue Shang

    (Department of Management, Qingdao Agricultural University, Qingdao 266109, China)

  • Jian Xu

    (Department of Business Administration, Dankook University, Jukjeon-ro 152, Yongin-si, Gyeonggi-do 16809, Korea)

Abstract

Government subsidies as a policy instrument are used to alleviate market failure in research and development (R&D) activities. We aim to understand the influence of government subsidies on enterprises’ R&D investment and performance. We are also interested in examining how the attributes of enterprise ownership act as a moderating variable for the relationship between government subsidies, R&D investment, and firm performance. We use firm-level data on China’s manufacturing listed companies from 2011 to 2015. The results show that receiving government subsidies improves private R&D investment and firm performance, and state-owned enterprises (SOEs) can obtain more subsidies than private-owned enterprises (POEs). However, the impact of government subsidies on private R&D investment is stronger in POEs than in SOEs of China. In additional analyses, we also examine this relationship by industry, region, subsidy intensity, and R&D intensity. This study has important policy implications for regulators to improve the effectiveness of government subsidies.

Suggested Citation

  • Zhenji Jin & Yue Shang & Jian Xu, 2018. "The Impact of Government Subsidies on Private R&D and Firm Performance: Does Ownership Matter in China’s Manufacturing Industry?," Sustainability, MDPI, vol. 10(7), pages 1-20, June.
    • Handle: RePEc:gam:jsusta:v:10:y:2018:i:7:p:2205-:d:154916
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    2. Idowu, Obakemi Funsho & Okiri, Inyang John & Olarewaju, Hassan Ismail, 2020. "Revisiting Government Expenditure and Private Investment Nexus: An ARDL Approach," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 54(1), pages 181-192.
    3. Jian Xu & Feng Liu & You-hua Chen, 2019. "R&D, Advertising and Firms’ Financial Performance in South Korea: Does Firm Size Matter?," Sustainability, MDPI, vol. 11(14), pages 1-16, July.
    4. , Aisdl, 2020. "Determining factors of financial performance of agricultural listed companies in China," OSF Preprints zc98p, Center for Open Science.
    5. Zhang, Wenwen & Chiu, Yi-Bin & Hsiao, Cody Yu-Ling, 2022. "Effects of country risks and government subsidies on renewable energy firms’ performance: Evidence from China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 158(C).
    6. Jiahui Xu & Chee-Pung Ng & Toong Hai Sam & Asokan Vasudevan & Poh Kiong Tee & Alex Hou Hong Ng & Wong Chee Hoo, 2023. "Fiscal and Tax Policies, Access to External Financing and Green Innovation Efficiency: An Evaluation of Chinese Listed Firms," Sustainability, MDPI, vol. 15(15), pages 1-19, July.
    7. Namryoung Lee, 2018. "R&D Accounting Treatment, R&D State and Tax Avoidance: With a Focus on Biotech Firms," Sustainability, MDPI, vol. 11(1), pages 1-12, December.
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    9. Wang, Zhongcheng & Li, Xinyue & Xue, Xinhong & Liu, Yahuan, 2022. "More government subsidies, more green innovation? The evidence from Chinese new energy vehicle enterprises," Renewable Energy, Elsevier, vol. 197(C), pages 11-21.
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    13. Yu, Feifei & Wang, Liting & Li, Xiaotong, 2020. "The effects of government subsidies on new energy vehicle enterprises: The moderating role of intelligent transformation," Energy Policy, Elsevier, vol. 141(C).
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    15. Namryoung Lee & Jaehong Lee, 2019. "External Financing, R&D Intensity, and Firm Value in Biotechnology Companies," Sustainability, MDPI, vol. 11(15), pages 1-18, July.
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    18. Li, Guangqin & Xue, Qing & Qin, Jiahong, 2022. "Environmental information disclosure and green technology innovation: Empirical evidence from China," Technological Forecasting and Social Change, Elsevier, vol. 176(C).
    19. Zhangsheng Jiang, 2020. "Can the Gap and Rating of Market Expectation Promote Innovation Input of China Manufacturers?," Sustainability, MDPI, vol. 12(5), pages 1-19, March.
    20. Wei Huang & Mahnoor Sattar, 2021. "Corporate finance policies, subsidies and R&D: Evidence from China," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(3), pages 3875-3891, July.
    21. Motaz Khorshid & Mohamed Ramadan A. Rezk & Mohamed Ismail & Leonardo Piccinetti & Leonardo Piccinetti & Amr Radwan & Omneia Helmy & Mahmoud M. Sakr, 2023. "Research, development and innovation in business enterprises: experience from Egypt," Insights into Regional Development, VsI Entrepreneurship and Sustainability Center, vol. 5(1), pages 41-58, March.
    22. Namryoung Lee & Jaehong Lee, 2019. "R & D Intensity and Dividend Policy: Evidence from South Korea’s Biotech Firms," Sustainability, MDPI, vol. 11(18), pages 1-21, September.
    23. Ziyang Chen & Xiao Feng & Ziwen He, 2022. "A Key to Stimulate Green Technology Innovation in China: The Expansion of High-Speed Railways," IJERPH, MDPI, vol. 20(1), pages 1-21, December.

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