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More Government Subsidies, More Innovation of New Energy Firms? Evidence from China

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  • Mei Feng

    (School of Economics and Management, University of Science and Technology Beijing, No. 30, Xueyuan Road, Haidian District, Beijing 100083, China)

  • Ye Wang

    (School of Economics and Management, University of Science and Technology Beijing, No. 30, Xueyuan Road, Haidian District, Beijing 100083, China)

Abstract

This paper evaluates the causal relationship between government subsidy and the innovation performance of new energy firms through count models using 2007–2021 data from China’s listed new energy companies. By looking at the subsidy for listed new energy firms and the number of granted patents, we find government subsidy policies significantly boost firms’ innovation performance. We estimate that a tenfold increase in government subsidy would lead to an increase of 7.11 in the total number of granted patents for new energy firms. Furthermore, a heterogeneity analysis shows such an effect varies depending on the nature of property rights, subsidy scale, and region for new energy firms. To be specific, state-owned firms are more dependent on government subsidy, the effect on innovation is generally higher in the high-subsidy group than in the low-subsidy group while being higher in the low-subsidy group when it comes to low-tech design patents, and firms in the eastern region are most sensitive to government subsidy. This paper also assesses the role of R&D investment in how government subsidy policies boost firms’ innovation performance; that is, by increasing their R&D funding investment rather than R&D manpower investment. These findings illustrate that in developing countries, government subsidy is effective in boosting new energy firms’ innovation performance.

Suggested Citation

  • Mei Feng & Ye Wang, 2023. "More Government Subsidies, More Innovation of New Energy Firms? Evidence from China," Sustainability, MDPI, vol. 15(11), pages 1-23, May.
    • Handle: RePEc:gam:jsusta:v:15:y:2023:i:11:p:8819-:d:1159649
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