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Impact of Government Subsidies on Manufacturing Innovation in China: The Moderating Role of Political Connections and Investor Attention

Shuang Wang (), Shukuan Zhao (), Dong Shao () and Hongyu Liu ()
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Shuang Wang: School of Management, Jilin University, Changchun 130022, China
Shukuan Zhao: School of Management, Jilin University, Changchun 130022, China
Dong Shao: School of Management, Jilin University, Changchun 130022, China
Hongyu Liu: School of Management, Jilin University, Changchun 130022, China

Sustainability, 2020, vol. 12, issue 18, 1-21

Abstract: Although government subsidies have gradually become a crucial means of endorsing public innovation policies, there remains no unified conclusion on the mechanism of their role in enterprise sustainable innovation investment. Employing sample data of listed Chinese manufacturing companies between 2011 and 2019, this study aims to discuss the incentive effect of government subsidies on enterprise innovation investment based on different enterprise ownership. With the combination of resource dependency theory and stakeholder theory, the findings suggest that the intensity of government subsidies exerts an incentive effect on corporate innovation investment; however, the incentive effect is different under the influence of political connections and investor attention. In particular, political connections inhibit the incentive effect and investor attention promotes the incentive effect. Overall, this study provides empirical evidence for the rational allocation of resources by the Chinese government and the acquisition of innovation investment by enterprises of different ownerships and the development of innovation capabilities.

Keywords: government subsidies; political connections; investor attention; innovation investment (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
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