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The Effect of Government Subsidy Policy for Foreign Capital R&D from the Perspective of Global Supply Chains: An Empirical Analysis with Time Lag and Propensity Score Matching

Author

Listed:
  • Haigang Li

    (School of Economics and Management, Northwest University, Xi’an 710127, China)

  • Shaofeng Ru

    (School of Economics and Management, Northwest University, Xi’an 710127, China)

  • Victor Shi

    (Lazaridis School of Business and Economics, Wilfrid Laurier University, 75 University Avenue West, Waterloo, ON N2L 3C5, Canada)

  • Peng Zhang

    (School of Management, Xi’an University of Architecture and Technology, Xi’an 710127, China)

  • Ganlin Pu

    (School of Economics and Management, Wenzhou Institute of Technology, Wenzhou 325000, China)

Abstract

(1) Background: with the emergence and continuous development of more multinational corporations, capital and resources flow rapidly in the form of global supply chains around the world. Furthermore, government subsidies for R&D are one of the key factors that affect foreign-funded R&D activities and their innovation output and performance in global supply chains. (2) Methods: in this paper, firstly, based on two sets of time series and dynamic panel data, we propose a distribution time lag model to test the effect of R&D subsidy policies from the macro perspective. Secondly, we employ the propensity score matching method to test the micro effect of R&D subsidy policies. (3) Results: our empirical results show that there are significant differences in the impacts of R&D subsidy policies on foreign capital funded innovation and domestic innovation. The main effect of government subsidy on foreign capital R&D is to improve the innovation output. However, regarding domestic R&D, it is to promote innovation performance. (4) Conclusions: Government subsidy is the main cause of the individual differences among the foreign funded R&D institutions in terms of innovation output and innovation performance. From the perspective of global supply chains, our analysis and results provide managerial and policy insights on subsidizing foreign investment in R&D in China.

Suggested Citation

  • Haigang Li & Shaofeng Ru & Victor Shi & Peng Zhang & Ganlin Pu, 2021. "The Effect of Government Subsidy Policy for Foreign Capital R&D from the Perspective of Global Supply Chains: An Empirical Analysis with Time Lag and Propensity Score Matching," Sustainability, MDPI, vol. 13(15), pages 1-12, July.
    • Handle: RePEc:gam:jsusta:v:13:y:2021:i:15:p:8188-:d:598982
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    References listed on IDEAS

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