Visible hands: The impact of subsidy withdrawal on new energy vehicle enterprises’ innovation behaviors

Yanyu Wang, Ting Lu and Yuanbo Qiao

Energy Policy, 2025, vol. 198, issue C

Abstract: This study explores the impact of government subsidy withdrawal on firms' innovation behavior, focusing on China's new energy vehicle (NEV) industry. The sector provides a compelling case, having transitioned from significant government support to a gradual subsidy withdrawal. We begin by reviewing the industry's evolution and proposing theoretical hypotheses. Using a lasso model, we evaluate the overall policy effects of subsidy withdrawal. Subsequently, we test these hypotheses with a regression discontinuity design, based on data from Chinese-listed NEV manufacturers from 2009 to 2020. The findings highlight that the subsidy withdrawal significantly influenced firms' innovation strategies. In response, companies increased their R&D investment while reducing symbolic innovation activities, with the effect being more pronounced among non-state-owned enterprises. This study offers new insights into policy evaluation and provides strategic guidance for NEV firms navigating subsidy withdrawal.

Keywords: Government subsidy; New energy vehicles; R&D investment; Symbolic innovation; Policy effects (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:198:y:2025:i:c:s0301421524004865

DOI: 10.1016/j.enpol.2024.114466

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