The effects of government subsidy measures on corporate R&D expenditure: a case study of the leading product development programme

Day-Yang Liu and Lon-Fon Shieh

International Journal of Product Development, 2005, vol. 2, issue 3, 265-281

Abstract: The purpose of this study is to develop a theoretical model with which to describe the relationship between public R&D subsidy programmes and corporate R&D spending. For this I have chosen Taiwan's leading product development programme as a basis for empirical study. The basic model for this study is to apply both the Capital Asset Pricing Model by Sharpe and Linter (1964) and Arbitrage Pricing Theory by Ross (1973) to the analytical return-risk framework in corporate R&D spending by Carmichael (1981). The total samples of the firms involved in this government R&D subsidies programme are firms during the 1991–2000 time period. The empirical results show that no matter the size of the company, the self-finance funding in R&D spending of the company shows positive correlation with both the corporate capital of the company and the government R&D subsidy. In contrast, the results also show a negative correlation with the sales revenue a year ahead. A single policy may entice companies to raise R&D expenditure under the conditions of investment tax credit on personnel training and on R&D spending, the technology development programme for enterprise, and subsidies from the leading product development programme. If the government exerts subsidy measures combined with bundling measures, this will demonstrate that the synergy of a comprehensive policy will be better than a single policy.

Keywords: government subsidy; product development; R&D spending; hi-tech industry; self-finance funding; capital asset pricing model; arbitrage pricing theory; corporate R&D; Taiwan; research and development; R&D policy; innovation. (search for similar items in EconPapers)
Date: 2005
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.inderscience.com/link.php?id=7252 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ids:ijpdev:v:2:y:2005:i:3:p:265-281

Access Statistics for this article

More articles in International Journal of Product Development from Inderscience Enterprises Ltd
Bibliographic data for series maintained by Sarah Parker ().