The Impact of Fiscal Policies on R&D at the Firm Level
Journal of Finance and Accounting
Volume 7, Issue 1, January 2019, Pages: 17-21
Received: Dec. 20, 2018; Published: Feb. 1, 2019
Views 743      Downloads 217
Yafeng Hu, School of China Academy of Public Finance and Public Policy, Central University of Finance and Economics, Beijing, P. R. China
Ke Gao, PBC School of Finance, Tsinghua University, Beijing, P. R. China; Development Research Center of Shandong Provincial People’s Government, Jinan, P. R. China
Article Tools
Follow on us
The existing researches about the effects of public policies on promoting enterprise innovation are mostly on large enterprises, but few on small and medium-sized enterprises. The literature on small and medium-sized enterprises in developing countries is even less. As an important part of the world economy and an important representative of developing countries, it is necessary to study the impact of China's public subsidies and tax incentives on the innovation and research and development of Chinese SMEs. Based on the relevant enterprise data, using the LSDV model, this paper empirically finds that the Chinese government's fiscal subsidy policies indeed promote enterprise innovation. After controlling for the year fixed effect and industry effect, government subsidies did stimulate enterprises' R&D investment, but the stimulus effect was very weak. Considering the endogeneity of public subsidies, the author added the lag term of public subsidies into the model, and the promotion effect of the policy was significantly enhanced. With the expansion of enterprise scale and the passage of enterprise establishment years, enterprise innovation investment decreases. The conclusion of this paper provides a basis for the government to formulate relevant policies. Government subsidies should be increased for newly established companies and for small and micro businesses.
Innovation, Financial Subsidies, Small and Medium-Sized Enterprises, Research and Development Expenditure
To cite this article
Yafeng Hu, Ke Gao, The Impact of Fiscal Policies on R&D at the Firm Level, Journal of Finance and Accounting. Vol. 7, No. 1, 2019, pp. 17-21. doi: 10.11648/j.jfa.20190701.13
David M. Levy, Nestor E. Terleckyj. Effects of Government R&D on Private R&D Investment and Productivity: A Macroeconomic Analysis. The Bell Journal of Economics, Vol. 14, No. 2 (Autumn, 1983), pp. 551-561.
Nadiri, M. Ishaq. "Innovations and Technological Spillovers." National Bureau of Economic Research Working Paper Series No. 4423 (1993).
Robson, Martin T. "Federal Funding and the Level of Private Expenditure on Basic Research." Southern Economic Journal 60, no. 1 (1993): 63-71. doi:10.2307/1059931.
Falk, Rahel. "Measuring the Effects of Public Support Schemes on Firms’ Innovation Activities: Survey Evidence from Austria." Research Policy 36, no. 5 (2007/06/01/ 2007): 665-79.
Almus, M. and D. Czarnitzki (2003). "The Effects of Public R&D Subsidies on Firms' Innovation Activities." Journal of Business & Economic Statistics 21 (2): 226-236.
Cappelen, Å., A. Raknerud, et al. (2012). "The effects of R&D tax credits on patenting and innovations." Research Policy 41 (2): 334-345.
Czarnitzki, Dirk, Bernd Ebersberger, and Andreas Fier. "The Relationship between R&D Collaboration, Subsidies and R&D Performance: Empirical Evidence from Finland and Germany." Journal of Applied Econometrics 22, no. 7 (2007/12/01 2007): 1347-66.
Blanes, J. V. and I. Busom (2004). "Who participates in R&D subsidy programs? The case of Spanish manufacturing firms." Research Policy 33 (10): 1459-1476.
Andrew A. Toole (2007). "Does Public Scientific Research Complement Private Investment in Research and Development in the Pharmaceutical Industry?" The Journal of Law and Economics 50 (1): 81-104.
Clausen, T. H. (2009). "Do subsidies have positive impacts on R&D and innovation activities at the firm level?" Structural Change and Economic Dynamics 20 (4): 239-253.
Czarnitzki, D., P. Hanel, et al. (2011). "Evaluating the impact of R&D tax credits on innovation: A micro econometric study on Canadian firms." Research Policy 40 (2): 217-229.
Douglas A. Irwin, Peter J. Klenow. (1996). High-tech R&D subsidies Estimating the effects of Sematech, Journal of International Economics, Volume 40, Issues 3–4, 323-344.
Wallsten, S. J. (2000). "The Effects of Government-Industry R&D Programs on Private R&D: The Case of the Small Business Innovation Research Program." The RAND Journal of Economics 31 (1): 82-100.
Yu ke, Yao Fengmin (2014). The Impact of Financial Subsidies on the Formation of Intellectual Property Rights of SMEs. Public Finance Research (09):61-64.
Theofanis P. Mamuneas, M. IshaqNadiri. (1996). Public R&D policies and cost behavior of the US manufacturing industries, Journal of Public Economics, Volume 63, Issue 1, Pages 57-81.
Holger Görg, Eric Strobl, Do Government Subsidies Stimulate Training Expenditure? Micro econometric Evidence from Plant-Level Data. Southern Economic Journal Vol. 72, No. 4 (Apr., 2006), pp. 860-876.
Guellec, D. and B. Van Pottelsberghe De La Potterie (2003). "The impact of public R&D expenditure on business R&D." Economics of Innovation and New Technology 12 (3): 225-243.
Zhou Ming, Wu Cuiqing (2017). The influence of government subsidies on small and medium-sized enterprise technology innovation. Science Research Management 38 (S1):574-580.
González, X. and C. Pazó (2008). "Do public subsidies stimulate private R&D spending?" Research Policy 37 (3): 371-389.
LI Wangfu, DU jing, et al (2017). Do R&D Subsidies Really Stimulate Firms’R&DSelf -financing Investment: New Evidence from China’ s Listed Firms. Journal of Financial Research (10):130-145.
DENG Ziji, YANG Zhihong (2011). Theoretic and Empirical Analysis of Fiscal and Tax Policies Inducing Enterprises' Technological Innovation. Finance & Trade Economics (05):5-10+136.
Qin jun. (2011). The financial support system for high-tech SMEs’ innovation. Science Research Management 32 (01):79-88.
Science Publishing Group
1 Rockefeller Plaza,
10th and 11th Floors,
New York, NY 10020
Tel: (001)347-983-5186