How Should the Chinese Government Invest R&D Funds: Enterprises or Institutions?

Yuhan Zhao and Xuguang Song ()
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Yuhan Zhao: Beijing Normal University
Xuguang Song: Beijing Normal University

Computational Economics, 2018, vol. 52, issue 4, No 4, 1089-1112

Abstract: Abstract With the rapid increase of the government R&D investment in China, the efficient optimization of the R&D investment areas of the Chinese government significantly influences regional innovation productivity and economic growth in the long run. By expanding the R&D-based growth model and using empirical analysis, this paper discusses the optimal combination for the government to coordinate its R&D expenditure as productive public investment in various sectors, under the condition of promoting long-term economic growth, is discussed by considering the aspects of capability for independent innovation, the development capability for basic knowledge, and the absorption capability for the technique. Results are as follows. (1) The level of production efficiency of enterprises, such as the capability for independent innovation, the development capability for basic knowledge, and absorption capability, influences the inclination of the government to invest in enterprises and institutions. When an enterprise has a high production efficiency level, technological level A, and knowledge storage B, increased investment from institutions to the enterprise can significantly promote regional economy growth. Otherwise, the government should increase R&D investment in institutions. (2) The government R&D investment in institutions can indirectly promote economic growth through the promotion of human capital and the understanding and absorption capacity of external knowledge, independent innovation capability, and basic knowledge development capability of enterprises. This paper may help the government to create appropriate policies with higher efficiency in R&D investment, and promote technical progress and economic growth in China.

Keywords: Government R&D investment; Basic research; Applied research; R&D-based growth model (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (5)

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DOI: 10.1007/s10614-017-9787-0

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