R&D Subsidies,political Connections,and Innovation Performance Of Private Enterprises

The Fifth Plenary Session of the 19 th Central Committee of the Communist Party of China proposed that we should affirm the importance of innovation.As the economy with the largest market share,private enterprises innovation vitality is crucial.The two main factors influencing innovation are R&D subsidies and political connections.On the one hand,due to the uncertainty of R&D activities,the government mainly encourages enterprises’ willingness to innovate through R&D subsidies;meanwhile,with the fierce market competition,private enterprises have been actively trying to seek informal system protection to ensure their own progress and development.Therefore,this paper establishes the logic of “R&D subsidies—political connections—innovation performance”,addressing the endogenous problems which make political connections as independent and innovation performance as dependent variables.This paper reflected in meeting the dual goals of the government and enterprises after subsidies,entrepreneur’s political relationship regulatory role.This paper takes private enterprises as the research object based that the innovation of private enterprises is facing multiple structural constraints;thus,they need to be given more attention.Meanwhile,the characteristics of the political connections between private enterprises and SOE are different in importance,cause and effect,thus the impact of the political connection of private enterprises on innovation performance needs to be further explored.This paper first analyzes the difference between SOE and private enterprises,analyzes the influence mechanism of R&D subsidies on the innovation performance of private enterprises,and discusses the mechanism of private enterprise political connection.Then,based on 1620 private listed companies(2015-2018)in China’s Shanghai and Shenzhen A stock manufacturing industry,we use multidimensional panel fixed effect model to test.The empirical results show that:(1)R&D subsidies promote innovation performance of private enterprises,including innovation investment,patent authorization and operating income.(2)Under the action of the regulation mechanism,the political connection of private enterprises plays a significant positive role in regulating innovation performance,but the significance of the influence is gradually weakening.(3)The regulatory role of political connection is different for different types of private enterprises.All the stages of the innovation performance of low-tech private enterprises are positively adjusted,for other types of private enterprises,political connection play different roles in each stage of the innovation cycle.For large private enterprises,the regulation of political connection is only significant in the patent performance,but for small and medium-sized private enterprises,political connection has effect on innovation investment performance;political connection has a significant regulation on the first two stages of innovation in the eastern region.However,the effect on the other regions is not obvious.Only in the western region,the operating income is significantly adjusted.Based on the research conclusions,this paper puts forward the relevant policy suggestions.(1)The government should carry out precisely in combination with the differences between private enterprises,guide private enterprises to correctly understand political connections and create healthy government-enterprise relations.(2)Private enterprises should not only continue to build good relations with the government,introduce political background executives,but also have a sense of crisis to avoid excessive dependence on political connections.