Anticorruption, Government Subsidies, and Innovation: Evidence from China

Lily Fang (), Josh Lerner (), Chaopeng Wu () and Qi Zhang ()
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Lily Fang: Finance Department, Institut Européen d’Administration des Affaires (INSEAD), Fontainebleau, France 77305
Josh Lerner: Entrepreneurial Management Unit and Finance Unit, Harvard Business School, Boston, Massachusetts 02163
Chaopeng Wu: School of Management, Xiamen University, Xiamen, Fujian 361005, China
Qi Zhang: School of Management, Shandong University, Jinan, Shandong 250100, China

Management Science, 2023, vol. 69, issue 8, 4363-4388

Abstract: We leverage an exogenous shock—the crackdown on corrupt Chinese officials beginning in 2012—and examine how the allocation of research subsidies and innovative outcomes were affected. We argue that the staggered removal of provincial heads on corruption charges during China’s anticorruption campaign and the unanticipated departures of local government officials responsible for innovation programs led to plausibly exogenous reductions in corruption. After both events, the allocation of subsidies became more sensitive to firm merit than to corruption and subsidies became more strongly associated with future innovation. Anticorruption efforts and officials’ career incentives improved the efficacy of subsidy programs.

Keywords: research and development; innovation; government; subsidies; anti-corruption (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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