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How Government Subsidy Effect Firm Innovation in Competitive Fields

【Authors】
YANG Zhiqing, ZHANG Fan & ZHANG Youdou
【WorkUnit】
YANG Zhiqing (Huazhong Agricultural University, 430070)ZHANG Fan (Zhejiang University of Finance and Economics,310018)ZHANG Youdou (Jiangxi University of Finance and Economics, 330013)
【Abstract】

The firms' innovative activities are important driving force for the high-quality development of the economy in China.This article explores how to properly fund government grants in competitive fields. Based on the Chinese patent application data and the financial data of listed companies, the paper empirically analyze the impact of government subsidies on firms' innovation in the competitive field. In terms of the impact path, this paper finds that government subsidies play a positive incentive role in reducing innovation costs and diversifying R&D risks in the early stage of innovative talents and capital investment. But for firms' innovation output benefits, government subsidies have a significant positive impact on the improvement of intangible assets of enterprises, but they have different effects on different patent outputs of enterprises, and the impact on utility and design patents is not obvious. Further regression results show that government subsidies have greater incentive effect on private enterprises than stateowned enterprises, and show better innovation performance in enterprises with lower capital intensity. At the same time, enterprises in areas with better property rights protection receive government subsidies. The positive impact is significant.
 
JEL:H25, H32, O38

【KeyWords】
Government Subsidy, Competitive Fields, Firms'Innovation, Property Protection