Government subsidies, R&D investment and innovation performance: analysis from pharmaceutical sector in China

ABSTRACT

Government subsidies play a vital role in enhancing firms’ investment in research and development (R&D). The study’s aim is to investigate the relationship between government subsidies (including government R&D and non-R&D subsidies), R&D investment and innovation performance of Chinese pharmaceutical listed companies over the period 2009–2015. The results show that government R&D subsidies can stimulate corporate R&D investment; government subsidies have no significant impact on innovation performance while R&D investment has a positive impact. In addition, we examine whether company ownership and executives’ technological experience affect this relationship. We also find that there is a positive relationship between government R&D subsidies and R&D investment only in private-owned companies; R&D investment positively influences innovation performance in state-owned companies or in companies with R&D executives. This study provides some insights for managers and policymakers in making effective innovation strategies.

KEYWORDS:

• Government R&D subsidies
• government non-R&D subsidies
• R&D investment
• innovation performance

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

The research was funded by the Key Training Program of Social Science Planning Project of Shandong Province for Young Scholars [grant number 17CQXJ08].

Notes on contributors

Jian Xu

Jian Xu is a lecturer in Qingdao Agricultural University, China. He got his PhD from Dankook University, South Korea. His current interest includes intellectual capital, R&D management and corporate performance evaluation.

Xiuhua Wang

Xiuhua Wang is an associate professor in Qingdao Agricultural University, China. She got her PhD from Ocean University of China. Her current interest includes R&D management and corporate performance evaluation.

Feng Liu

Feng Liu is an assistant professor in Shandong University, China. He got his PhD from Korea University Business School (KUBS), South Korea. His current research interest includes small business management, supply chain management and operations management.