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The signal effect of Government R&D Subsidies in China: Does ownership matter?

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  • Wu, Aihua

Abstract

R&D subsidies as a policy instrument are used to reduce market failure, apart from its input and output additionality, the notion of behavioural additionality has caused increasingly interest. We focus on the signal/certification effect of behavioural additionality, which means that government grants may serve as a signal for private investors. The signal effect is a certification enhancing a firm's access to external finance. The objective is to examine the impact of different ownership nature to the signal/certification effect. We use data on Chinese listed corporations from 2009 to 2013. The results show that receiving R&D subsidies increases the likelihood that firms will raise external finance, and the state-owned enterprises can receive more subsidies than private enterprises. However, the signal effect of R&D grants is stronger in private enterprises than that in state-owned enterprises of China, indicating that the ownership nature does matter in the R&D subsidies certification effect. This paper enriches current literature of government R&D subsidies by providing empirical evidences in Chinese mixed market.

Suggested Citation

  • Wu, Aihua, 2017. "The signal effect of Government R&D Subsidies in China: Does ownership matter?," Technological Forecasting and Social Change, Elsevier, vol. 117(C), pages 339-345.
  • Handle: RePEc:eee:tefoso:v:117:y:2017:i:c:p:339-345
    DOI: 10.1016/j.techfore.2016.08.033
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    More about this item

    Keywords

    R&D subsidies; Ownership; R&D investment; Signal effect; Certification effect;

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • P26 - Economic Systems - - Socialist Systems and Transition Economies - - - Political Economy
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory

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