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Visible hands: The impact of subsidy withdrawal on new energy vehicle enterprises’ innovation behaviors

Author

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  • Wang, Yanyu
  • Lu, Ting
  • Qiao, Yuanbo

Abstract

This study explores the impact of government subsidy withdrawal on firms' innovation behavior, focusing on China's new energy vehicle (NEV) industry. The sector provides a compelling case, having transitioned from significant government support to a gradual subsidy withdrawal. We begin by reviewing the industry's evolution and proposing theoretical hypotheses. Using a lasso model, we evaluate the overall policy effects of subsidy withdrawal. Subsequently, we test these hypotheses with a regression discontinuity design, based on data from Chinese-listed NEV manufacturers from 2009 to 2020. The findings highlight that the subsidy withdrawal significantly influenced firms' innovation strategies. In response, companies increased their R&D investment while reducing symbolic innovation activities, with the effect being more pronounced among non-state-owned enterprises. This study offers new insights into policy evaluation and provides strategic guidance for NEV firms navigating subsidy withdrawal.

Suggested Citation

  • Wang, Yanyu & Lu, Ting & Qiao, Yuanbo, 2025. "Visible hands: The impact of subsidy withdrawal on new energy vehicle enterprises’ innovation behaviors," Energy Policy, Elsevier, vol. 198(C).
    • Handle: RePEc:eee:enepol:v:198:y:2025:i:c:s0301421524004865
    DOI: 10.1016/j.enpol.2024.114466
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