Do government subsidies crowd out technological capabilities?

Abstract

Purpose Extant research on the crowding-out effects of government subsidies on the positive role of firm innovation resources or activity remains limited. This paper aims to investigate the crowding-out effects of subsidies on the utilization of technological capabilities and also the contingency mechanisms of market-oriented economy based on the resource-based view (RBV), given the co-existence of the subsidies and technological capabilities for firm innovation in transitional economy. Design/methodology/approach This paper used panel data of 115 Chinese high-tech firms from 2002 to 2010. Fixed-effects model was used to test several hypotheses. Findings This paper empirically demonstrates that the subsidies crowd out the utilization of firms’ technological capabilities for invention outcomes in the near-term. Furthermore, this paper finds that the crowding-out effects are weaker when firms have high export intensity or are located in provinces with high market-oriented systems. Research limitations/implications The findings of this paper apply to Chinese firms. Future research could test their generalizability to different samples and other transitional economies. Practical implications This paper highlights the crowding-out effects of the subsidies, revealing that high-tech firms should balance the direct effects and crowding-out effects of the subsidies. Originality/value This paper highlights the neglected interactions between the subsidies and technological capabilities based on RBV and provides a more nuanced understanding of the crowding-out effects of the subsidies in transitional economy.

Trade Structure Optimization, Technological Progress and Green Technological Innovation: The Regulatory Effect of Government Support

“…Therefore, government support can exert certain effects in the influence of trade structure optimization on technological progress. Some scholars think it may exert positive effects [5][6], while some scholars believe that it may exert negative effects [7]. In order to cope with the different viewpoint, this paper divides the government support into two dimensions low-carbon subsidy and R&D subsidy so that the role of government support in the impact of trade structure optimization on technological progress can be clarified.…”