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The Impact of Government Subsidies on Private R&D and Firm Performance: Does Ownership Matter in China’s Manufacturing Industry?

Zhenji Jin (), Yue Shang () and Jian Xu ()
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Zhenji Jin: Department of Management, Qingdao Agricultural University, Qingdao 266109, China
Yue Shang: Department of Management, Qingdao Agricultural University, Qingdao 266109, China
Jian Xu: Department of Business Administration, Dankook University, Jukjeon-ro 152, Yongin-si, Gyeonggi-do 16809, Korea

Sustainability, 2018, vol. 10, issue 7, 1-20

Abstract: Government subsidies as a policy instrument are used to alleviate market failure in research and development (R&D) activities. We aim to understand the influence of government subsidies on enterprises’ R&D investment and performance. We are also interested in examining how the attributes of enterprise ownership act as a moderating variable for the relationship between government subsidies, R&D investment, and firm performance. We use firm-level data on China’s manufacturing listed companies from 2011 to 2015. The results show that receiving government subsidies improves private R&D investment and firm performance, and state-owned enterprises (SOEs) can obtain more subsidies than private-owned enterprises (POEs). However, the impact of government subsidies on private R&D investment is stronger in POEs than in SOEs of China. In additional analyses, we also examine this relationship by industry, region, subsidy intensity, and R&D intensity. This study has important policy implications for regulators to improve the effectiveness of government subsidies.

Keywords: government subsidy; R&D investment; firm performance; ownership; manufacturing listed company (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2018
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