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Opening the box of subsidies: which is more effective for innovation?

Shiyuan Liu (), Jiang Du (), Weike Zhang and Xiaoli Tian ()
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Shiyuan Liu: Sichuan University
Jiang Du: Sichuan University
Xiaoli Tian: Southwest University of Finance and Economics of China

Eurasian Business Review, 2021, vol. 11, issue 3, No 3, 449 pages

Abstract: Abstract Government research and development (R&D) subsidy is one of the main policy instruments to deal with market failure, and its effectiveness has attracted attention increasingly. This study investigates the impact of two types of government R&D subsidies on innovation using the data of Chinese listed enterprises from 2010 to 2016. We find that compared with ex-post rewards, ex-ante grants have a better effect on innovation performance by stimulating private R&D investment. Additionally, the effectiveness of government R&D subsidies is weakened in enterprises engaging in rent-seeking and political connections. This study provides a new perspective for understanding the effect of government R&D subsidies, and the research conclusions are the relevant reference for the government to improve the efficiency of allocating public funds.

Keywords: Research and development (R&D) subsidies; Ex-ante grants; Ex-post rewards; Innovation performance (search for similar items in EconPapers)
JEL-codes: G34 G38 H25 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s40821-020-00178-2

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