Research On The Impact Of Government R&D Funding On Firms' Innovation Behavior

Firms are the mainstay of innovation.Enhancing the firms' ability is the fundamental way to improve the level of national science and technology and the core competitiveness.Firm R&D activities are the key to improving the innovation capability of enterprises.However,firm technology innovation has half-public product characteristics,leading to the social return higher than the private,so that the firms are unwilling to carry out innovative activities,resulting in market failure.Therefore,the government needs to implement relevant policies to guide firms.At present,direct subsidies and tax incentives are widely used in various countries and regions to stimulate innovation.In recent years,the government subsidies in China have been continuously strengthened.So assessing the impact of government subsidies on firm innovation scientifically and accurately has become the focus of government and scholars.Current mainstream researches focus on the impact of subsidy policies on firm R&D investment and add evidence to the incentive-crowding out effect.In reality,whether the firms,especially large and medium-sized firms with innovative strength,really put increased R&D expenditure into R&D activities,policy implementers often ignored.Based on information asymmetry and firm's adverse selection,it is difficult for the government to conduct a comprehensive review of the firm real situation.In order to complete government funding targets or obtain higher subsidies,firms may have R&D investment manipulation,and these “management expenditures” are not really used for R&D activities,and naturally it cannot improve the level of innovation.Therefore,it is impossible to truly capture the effectiveness of subsidy policies from the perspective of input.This paper reconstructs the firm innovation behavior based on the perspective of innovation process.It divides the firm innovation behavior into R&D investment behavior,risk-taking behavior and external technology acquisition behavior.It not only pays attention to the change of firm investment,but also pays attention to the “what” and “how” do change.This paper uses 498 high-tech firms in Guangdong Province for four consecutive years to overcome the endogenous evidence and apply the methods of propensity score matching(PSM)and the Heckman two-stage model to test the impact of government subsidies on R&D investment behavior,risk-taking behavior and external technology acquisition behavior.The empirical results show that: Firstly,the impact on the firm R&D investment behavior is that different ways of government subsidies can effectively increase the scale of private R&D expenditures,and from the dynamic perspective,the different ways of government subsidies have a continuous inductive effect on the scale of R&D expenditures,but weaker impact on firm input intensity.Secondly,the impact on firm risk-taking behavior is that tax incentives can significantly change the number of firm generic technology projects and firm generic technology preferences.From the dynamic perspective,there are no sustained effects on the firm risk-taking behavior.Thirdly,the impact on firm external technology acquisition behavior is that direct subsidies and policy mix can significantly increase the scale of external technology acquisition expenditures.However,from the dynamic perspective,there is no continuous inductive effect on the firm external technology acquisition behavior.The paper further explores the impact of policy mix versus single policy comparison,firm size,and industry characteristics.The results show that there is a difference in the impact of policy mix and single policy on the impact of different firm innovation behaviors.The regulatory role played by the firm size on the effects of government subsidies is complex.The effect of government subsidies varies significantly across industries.