The impact of government subsidies and enterprises’ R&amp;D investment: A panel data study from renewable energy in China

Abstract:We examine the driving effects of various factors on technological innovation to renewables (TIRES), focusing on a set of 29 provinces in China, and apply a dynamic panel approach. China has become a leading player in research and development spending in renewables, and the dynamic panel estimators we use prove themselves to be suitable in handling the persistent effect on TIRES. The level of TIRES in the previous periods is positively and highly correlated with that in the current period and confirmed the need for a stable and consistent policy support for renewables. Electricity consumption is the most important driver for all renewables and wind energy, but the driving effect was weaker for solar energy and biomass. Research and development intensity is the most important driver for biomass, but is only the second most important driver for all renewables, solar energy and wind energy. Unexpectedly, electricity price has had significant negative impacts on TIRES, which reveals that lowering electricity prices will lead to higher innovation in renewables. The driving effect of renewable energy tariff surcharge subsidy is not significant, which means that Chinese subsidy policy has not played the desired role. The driving effect of installed renewable energy capacity is also minimal, which may be due to the fact that overcapacity will hinder TIRES in China. This paper may help policy-makers and the industry understand how to promote TIRES in China effectively based on these above influential factors.

Section: Discussionmentioning

confidence: 99%

Factors That Influence Renewable Energy Technological Innovation in China: A Dynamic Panel Approach

et al. 2018

“…Although the M&As and OFDI carried out by Chinese firms are usually suppressed by foreign government in question for being highly connected with the Chinese government-for example, the ban on Huawei and ZTE (Zhongxing Telecommunication Equipment Corporation) and the termination of acquiring Philips Lumileds carried out by China's Jinshajiang Venture Capital-the Chinese government still plays an active and important role in Chinese firms' promotion of innovation performance through international R&D investment. For example, firm managers with strong political connections-especially those managing state-owned firms that are more likely to be supported by Chinese government [46]-have more opportunities to accompany the government leaders to attend foreign visits, with the intention of signing technical treaties with international firms [4,47]. The Chinese government also provides financial support for domestic firms to merge with international high-tech firms and acquire international technologies [4,48].…”

Section: Political Connection and Technology Acquisitionmentioning

confidence: 99%

Impact of Political Connection Strength on the Internationalization Outcome of Chinese Firms: Perspectives from Market Exploration and Technology Acquisition

Zhang

Huang

2020

Although the role of a home country's government in firms' internationalization processes has been investigated, there is a gap in the literature concerning the effectiveness of the government's effort. Based on the data of 1996 Chinese listed firms, this study investigates how the strength of Chinese firms' political connection with their home country government impacts the outcomes of their internationalization activities. These activities are classified into market exploration and technology acquisition. We establish an index to measure the firms' political connection strength and find that it exhibits a bimodal distribution, which indicates that some firms maintain a close relationship with the government, while the business activities of others are distant from the government. The strength of the political connection has different moderating effects on firms' internationalization processes when either the international market context or the firms' internationalization activities vary. A strong political connection is beneficial for firms to explore the markets and acquire beneficial technology from developed countries. Compared with its role in exploring international markets, political connection plays a more significant moderating role in augmenting the positive effect of international technology acquisition on firms' innovation capability. Therefore, Chinese firms may perform better in the internationalization process if they maintain a close relationship with the Chinese government, which engages in promoting the internationalization of domestic firms through an array of policies that may compensate for the firms' disadvantages. Our results show the mechanism through which emerging countries' governments use directives and incentives to facilitate the internationalization of domestic firms.

“…Prior studies [28][29][30][31] have also shown that government subsidies usually have a lagging effect on a firm's innovative activities and R&D investment. Therefore, we came to the following hypotheses: H1.…”

Section: Relationship Between Government Subsidies and Randd Investmentmentioning

confidence: 99%

The Impact of Government Subsidies on Private R&D and Firm Performance: Does Ownership Matter in China’s Manufacturing Industry?

Jin

Shang

2018

Government subsidies as a policy instrument are used to alleviate market failure in research and development (R&D) activities. We aim to understand the influence of government subsidies on enterprises' R&D investment and performance. We are also interested in examining how the attributes of enterprise ownership act as a moderating variable for the relationship between government subsidies, R&D investment, and firm performance. We use firm-level data on China's manufacturing listed companies from 2011 to 2015. The results show that receiving government subsidies improves private R&D investment and firm performance, and state-owned enterprises (SOEs) can obtain more subsidies than private-owned enterprises (POEs). However, the impact of government subsidies on private R&D investment is stronger in POEs than in SOEs of China. In additional analyses, we also examine this relationship by industry, region, subsidy intensity, and R&D intensity. This study has important policy implications for regulators to improve the effectiveness of government subsidies.