Can Government Subsidies Facilitate TFP Growth? From the Perspective of Dynamic Capability

Xiaoxuan Zhu (), Feiyun Zuo, Suwan Wang (), Qing Yang () and Xing Shi ()
Additional contact information
Xiaoxuan Zhu: School of Economics, Hefei University of Technology, No. 420, Feicui Road, Shushan District, Hefei, Anhui, P. R. China
Feiyun Zuo: School of Economics, Hefei University of Technology, No. 420, Feicui Road, Shushan District, Hefei, Anhui, P. R. China
Suwan Wang: ��Anhui Transportation Holding Group Co., Ltd., No. 1666 Tibet Road, Baohe District, Hefei, Anhui, P. R. China
Qing Yang: ��School of Accounting, Zhejiang University of Finance and Economics, No. 18 Xueyuan Street, Qiantang District, Hangzhou, Zhejiang, P. R. China
Xing Shi: School of Economics, Hefei University of Technology, No. 420, Feicui Road, Shushan District, Hefei, Anhui, P. R. China

International Journal of Innovation and Technology Management (IJITM), 2024, vol. 21, issue 05, 1-29

Abstract: Although the main reason governments offer subsidies is to guide production activities and enhance the competencies of individual firms, its economic effectiveness and influential mechanism remain unclear. In this study, based on dynamic capability perspective, we introduce knowledge flows (i.e. inflows and outflows) and examine their mediation roles in the relationship between government subsidies and total factor productivity (TFP) growth. Empirical analysis is conducted using panel data from 4,335 Chinese public listed firms during the period from 2007 to 2020. The regression results show that government subsidies have a positive influence on firms’ TFP growth. Further analysis confirms that government subsidies can positively affect TFP growth by influencing both knowledge inflows and outflows. This paper enriches the current literature by involving dynamic capability theory, providing novel insights into the influential mechanisms of government subsidies. Additionally, we introduce TFP as a more comprehensive measurement to avoid bias resulting from a one-sided assessment of performance. This study also provides practical inspiration for firms to design appropriate knowledge management systems and leverage the effectiveness of government subsidies in terms of firm growth.

Keywords: Government subsidy; dynamic capability; knowledge inflows; knowledge outflows; total factor productivity (TFP) (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S0219877024500354
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:ijitmx:v:21:y:2024:i:05:n:s0219877024500354

Ordering information: This journal article can be ordered from

DOI: 10.1142/S0219877024500354

Access Statistics for this article

International Journal of Innovation and Technology Management (IJITM) is currently edited by H K Tang

More articles in International Journal of Innovation and Technology Management (IJITM) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().