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Can government subsidy strategies and strategy combinations effectively stimulate enterprise innovation? Theory and evidence

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  • Wanshu Wu

    (Huaqiao University)

  • Kai Zhao

    (Huaqiao University)

  • Lei Li

    (Huaqiao University)

Abstract

This paper tries to disentangle between the effects of non-R&D and R&D subsidies, and explores the mechanism of different subsidies and their combination on R&D investment and innovation output of listed enterprises in China by combining theory with empirical research. Based on the unbalanced panel data of 2707 Chinese listed enterprises from the year 2008 to 2015, this study confirms that both R&D subsidy and non-R&D subsidy have an incentive effect on the R&D investment, but the former is more effective than the latter. When R&D subsidy is at a high level, there is a positive relation between government non-R&D subsidies and enterprise R&D investment; sufficient non-R&D subsidies can effectively strengthen the incentive effect of R&D subsidies on R&D investment of enterprises. Furthermore, R&D subsidy can promote the innovation output of enterprises through direct and indirect paths, whereas, non-R&D subsidy or subsidy policy-mix has a certain “masking effect” on the innovation output.

Suggested Citation

  • Wanshu Wu & Kai Zhao & Lei Li, 2021. "Can government subsidy strategies and strategy combinations effectively stimulate enterprise innovation? Theory and evidence," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 38(2), pages 423-446, July.
    • Handle: RePEc:spr:epolit:v:38:y:2021:i:2:d:10.1007_s40888-021-00230-y
    DOI: 10.1007/s40888-021-00230-y
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    More about this item

    Keywords

    Non-R&D subsidies; Strategy combination; Subsidy policy-mix; R&D investment;
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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