Do Innovation Subsidies Make Chinese Firms More Innovative? Evidence from the China Employer Employee Survey

Hong Cheng, Hanbing Fan, Takeo Hoshi and Dezhuang Hu

No 25432, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The Chinese government has been using various subsidies to encourage innovations by Chinese firms. This paper examines the allocation and impacts of innovation subsidies, using the data from the China Employer Employee Survey (CEES). We find that the innovation subsidies are preferentially allocated to state owned firms and politically connected firms. Of these two (state ownership and political connection), political connection is more important in determining the allocation. We also find that the firms that receive innovation subsidies file and receive more patents, are more likely to introduce new products, but do not necessarily file and receive more patents abroad. Finally, the firms that receive innovation subsidies do not have higher productivity, more profits, or larger market shares. Overall, the results point to inefficiency of allocation of innovation subsidies and show that the subsidies encourage only incremental innovations and not radical ones.

JEL-codes: O25 O38 P48 (search for similar items in EconPapers)
Date: 2019-01
New Economics Papers: this item is included in nep-cna, nep-ino, nep-tid and nep-tra
Note: CF PR
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

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