Funding Forms, Market Conditions, and Dynamic Effects of Government R&D Subsidies: Evidence from China

18 Pages Posted: 14 May 2020

See all articles by Di Guo

Di Guo

Brunel University London

Yan Guo

Peking University

Kun Jiang

University of Roehampton

Multiple version iconThere are 2 versions of this paper

Date Written: April 2017

Abstract

We examine various factors that influence the effects of government‐subsidized research and development (R&D) programs on firm productivity. Based on a panel dataset of Chinese firms, we find the effects of the Innovation Fund for Small and Medium Technology Based Firms (Innofund) are dynamic over time and are heterogeneous depending on funding forms and the level of marketization and economic development across regions. In general, Innfound has significant and positive effects on firm productivity in both the short and long run. However, the short‐term effects of Innofund are stronger than the long‐term ones. Additionally, the positive effects of Innofund are stronger for firms backed by interest‐free bank loans than those supported by appropriation. Meanwhile, Innofund has stronger positive effects in provinces that are less market‐oriented or less developed economically. Finally, the short‐term effects of Innofund stay stronger than the long‐term ones even after we control the funding forms and the market conditions across regions. Identification and selection concerns are addressed through the propensity score matching approach and two‐stage estimation.

JEL Classification: G28 O38 H76

Suggested Citation

Guo, Di and Guo, Yan and Jiang, Kun, Funding Forms, Market Conditions, and Dynamic Effects of Government R&D Subsidies: Evidence from China (April 2017). Economic Inquiry, Vol. 55, Issue 2, pp. 825-842, 2017, Available at SSRN: https://ssrn.com/abstract=3596352 or http://dx.doi.org/10.1111/ecin.12395

Di Guo (Contact Author)

Brunel University London ( email )

Kingston Lane
Uxbridge
United Kingdom, London Ub8 3PH
United Kingdom

HOME PAGE: http://https://www.brunel.ac.uk/people/di-guo

Yan Guo

Peking University ( email )

No. 38 Xueyuan Road
Haidian District
Beijing, Beijing 100871
China

Kun Jiang

University of Roehampton ( email )

Roehampton Lane
London, SW15 5PU
United Kingdom

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