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Can government subsidy strategies and strategy combinations effectively stimulate enterprise innovation? Theory and evidence

Wanshu Wu, Kai Zhao () and Lei Li
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Wanshu Wu: Huaqiao University
Kai Zhao: Huaqiao University
Lei Li: Huaqiao University

Economia Politica: Journal of Analytical and Institutional Economics, 2021, vol. 38, issue 2, No 1, 423-446

Abstract: Abstract This paper tries to disentangle between the effects of non-R&D and R&D subsidies, and explores the mechanism of different subsidies and their combination on R&D investment and innovation output of listed enterprises in China by combining theory with empirical research. Based on the unbalanced panel data of 2707 Chinese listed enterprises from the year 2008 to 2015, this study confirms that both R&D subsidy and non-R&D subsidy have an incentive effect on the R&D investment, but the former is more effective than the latter. When R&D subsidy is at a high level, there is a positive relation between government non-R&D subsidies and enterprise R&D investment; sufficient non-R&D subsidies can effectively strengthen the incentive effect of R&D subsidies on R&D investment of enterprises. Furthermore, R&D subsidy can promote the innovation output of enterprises through direct and indirect paths, whereas, non-R&D subsidy or subsidy policy-mix has a certain “masking effect” on the innovation output.

Keywords: Non-R&D subsidies; Strategy combination; Subsidy policy-mix; R&D investment (search for similar items in EconPapers)
JEL-codes: C5 H20 L22 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s40888-021-00230-y

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