R&D subsidy and corporate innovation: an integrated view of resource allocation and resource utilisation

ABSTRACTThis study develops an integrated framework taking both resource allocation and utilisation into account to argue that R&D subsidy effectiveness depends on both the way subsidy is allocated by governments and utilised by firms. When subsidy is allocated to a firm based on its technological capability, the firm is more likely to utilise subsidy for its intended use (i.e. to produce additional R&D investment) and transform such investment into more innovation output. In contrast, when subsidy is allocated to a firm based on its political connection, the firm is less likely to utilise subsidy for its intended use and produce less innovation output. The allocation and utilisation effects vary across provinces with different levels of government intervention. We find empirical support for our hypotheses by using a sample of Chinese privately controlled listed firms from 2010 to 2016. This study contributes to R&D subsidy evaluation studies and resource management literature.KEYWORDS: R&D subsidycorporate innovationresource allocation and utilisationtechnological capabilitypolitical connectionJEL CLASSIFICATION: L25M21O32 Disclosure statementNo potential conflict of interest was reported by the authors.Data availability statementThe authors will provide research data on request.Supplemental dataSupplemental data for this article can be accessed online at https://doi.org/10.1080/13662716.2023.2273579Notes1 http://wchscu.cn/scientific/science_technology/notification/65283.html2 The lagging of models in Equations (1) - (4) is based on the temporal sequence that TC and PC in t-1 influence subsidy acquisition in t, and then private R&D investment in t +1, and finally innovation output in t +2.:3 Foreign patents are usually valuable and can reflect substantive innovation. According to China Patent Survey Report conducted by the National Intellectual Property Administration of China in 2013 (see https://www.cnipa.gov.cn/tjxx/jianbao/year2013/indexy.html), the number of invention patent applications to foreign countries is 25,135 and to China is 704,936. Therefore, applications to other patent offices account for a very small proportion (3.4%) of patent applications of Chinese firms. We thus believe that not considering applications to other patent offices in our analyses may not be a serious concern.4 We thank an anonymous reviewer for this suggestion.5 https://cmi.ssap.com.cn/instruction?key=36 We thank an anonymous reviewer for this suggestion.7 We appreciate one of anonymous reviewers, who inspires us to articulate this contribution.Additional informationFundingThis work was supported by the National Natural Science Foundation of China under Grant number 72202239; and Natural Science Foundation of Hunan Province under Grant number 2022JJ40654. This work was also supported by the Key Project of National Natural Science Foundation of China under Grant number 72091313.