Does internationalization encourage state-owned enterprises to utilize subsidies to innovate? Evidence from high-tech and automobile manufacturing industries of Chinese listed companies

Abstract

Purpose Drawing on the resource-based view, institutional logic and isomorphic pressure theories, this study constructed a theoretical model to explore the correlations between government subsidies and innovation performance. Particularly, this study aims to investigate the moderating effects of ownership types and degree of internationalization on these relationships. Design/methodology/approach To empirically test the relationships, the authors use panel data from high-tech manufacturing and automobile manufacturing industries in Chinese A stock listed companies for the period 2011–2015 and performed regression analysis. Findings Results indicate that government subsidies positively enhance enterprises’ innovation performance; there is a big gap between government subsidies’ incentive effect on innovation performance between state-owned enterprises (SOEs) and private-owned enterprises (POEs); with the improvement of internationalization, the promotion effect of government subsidies on enterprise innovation performance is strengthened; there is a three-way interaction between government subsidies, degree of internationalization and ownership types, such that in the presence of a low degree of internationalization, there is a big gap in the incentive effect of government subsidies on the innovation performance of SOEs and POEs; in the presence of a high degree of internationalization, the gap is significantly reduced. Originality/value This is an empirical study on the impact mechanism of ownership types and internationalization on the relationship between government subsidies and innovation performance in China. It provides valuable insights to show how internationalization can dramatically improve SOEs’ efficiency disadvantages in the allocation of government subsidies to innovation activities.

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