Research On The Effect Of Government Subsidies On Enterprise Innovation

The Fifth Plenary Session of the Nineteenth Central Committee attached great importance to enhancing the innovation capacity of enterprises and promoting their innovative activities.To promote enterprises’ independent R&D and enhance the quality of their innovation,the government at all levels in China often guides micro-enterprises to improve their innovation capacity by government subsidies.But can government subsidies effectively motivate micro-enterprises to innovate? Existing studies have not reached a unified conclusion on the relationship between government subsidies and enterprise innovation.As a dynamically developing individual,enterprises may utilize government subsidies differently at different stages of development.Thus,in the context of the present government’s vigorous support for enterprise innovation,this thesis investigates the relationship between government subsidies and enterprise innovation based on the research perspective of enterprise life cycles.First,this thesis summarizes and integrates the main findings of the existing literature,and also analyzes the mechanism of government subsidies influencing enterprise innovation and the main characteristics of enterprises in different life cycles by combining relevant theories such as signaling theory and enterprise life cycles theory.Next,government subsidies and enterprise innovation in different life cycles are analyzed to find the heterogeneity of enterprises.Then,using 2013-2020 as the research window,this thesis compiles data on the main characteristics of 1252 listed companies in Shanghai and Shenzhen A-shares,such as government subsidies,R&D investment,and number of patent applications,and measures enterprise innovation based on both innovation investment and innovation output,and further divides government subsidies into government innovation subsidies and non-innovation subsidies,and establishes a panel multiple regression model,and conducts an empirical analysis on the full sample and sub-samples at each life cycle stage.Heterogeneity is tested by the nature of equity and whether it belongs to the manufacturing industry.The direct resource replenishment mechanism and indirect signaling mechanism of government subsidies are further tested.The final results show that:(1)government innovation subsidies can significantly promote enterprise innovation through direct resource supplementation and indirect signaling mechanisms,while government non-innovation subsidies only have a pro-increasing effect on enterprises’ innovation investment;(2)from the life cycles perspective,government subsidies can significantly stimulate the innovation activities of enterprises in the growth and maturity stages,but not in the decline stage;(3)the impact of government subsidies on enterprise innovation is heterogeneous in terms of the nature of equity,government subsidies can promote innovation in non-state-owned enterprises,and the promotion effect is significantly concentrated in the growth period of non-state-owned enterprises;(4)the impact of government subsidies on enterprise innovation is different between manufacturing enterprises and non-manufacturing enterprises.The incremental effect of government subsidies on innovation investment and output of non-manufacturing enterprises is better than that of manufacturing enterprises,and the incremental effect is significantly concentrated in the growth period of non-manufacturing enterprises.Based on the above theoretical analysis and empirical test results,the following policy recommendations are put forward:(1)increase government subsidies and effectively play the signaling function of government subsidies;(2)reasonably allocate government subsidies according to the characteristics of enterprises with different life cycles;(3)improve the enterprise distribution structure of government subsidies and increase support for R&D of non-state and non-manufacturing enterprises;(4)enterprises should improve the efficiency of using government subsidies and effectively earmark them;(5)enterprises should actively integrate internal and external resources to improve their innovation ability;(6)enterprises should increase the disclosure of information and effectively improve corporate governance.