More Government Subsidies, More Innovation of New Energy Firms? Evidence from China

This paper evaluates the causal relationship between government subsidy and the innovation performance of new energy firms through count models using 2007-2021 data from China's listed new energy companies. By looking at the subsidy for listed new energy firms and the number of granted patents, we find government subsidy policies significantly boost firms' innovation performance. We estimate that a tenfold increase in government subsidy would lead to an increase of 7.11 in the total number of granted patents for new energy firms. Furthermore, a heterogeneity analysis shows such an effect varies depending on the nature of property rights, subsidy scale, and region for new energy firms. To be specific, state-owned firms are more dependent on government subsidy, the effect on innovation is generally higher in the high-subsidy group than in the low-subsidy group while being higher in the low-subsidy group when it comes to low-tech design patents, and firms in the eastern region are most sensitive to government subsidy. This paper also assesses the role of R&D investment in how government subsidy policies boost firms' innovation performance; that is, by increasing their R&D funding investment rather than R&D manpower investment. These findings illustrate that in developing countries, government subsidy is effective in boosting new energy firms' innovation performance.

Automated summary

This paper evaluates the causal relationship between government subsidy and the innovation performance of new energy firms in China. The study finds that government subsidy policies significantly boost firms' innovation performance, leading to an increase in the total number of granted patents. The effect varies depending on property rights, subsidy scale, and region for new energy firms. Moreover, R&D investment plays a crucial role in how government subsidy policies enhance firms' innovation performance.