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Effect of government subsidization on Chinese industrial firms’ technological innovation efficiency: A stochastic frontier analysis

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  • Qi Huang
  • Marshall S. Jiang
  • Jianjun Miao

Abstract

This study aims to gain a better understanding of how effective government subsidization is in helping foster firms’ innovation. Drawing on the exploration/exploita- tion perspective and based on data collected from Statistical Yearbook on Science and Technology Activities of Industrial Enterprises , we look into the relationship between gov- ernment subsidization and Chinese firms’ innovation efficiency by applying a stochastic frontier analysis. The results show that when government subsidies are provided in small scale, firms’ innovation efficiency decreases; only when government subsidies increase to a certain scale, does firms’ innovation efficiency start to increase. We suggest that govern- ment subsidization would generate better innovation performance should it concentrate on a smaller number of firms at one time. As existing research is still inconclusive regarding the relationship between government subsidization and firms’ technological innovation output, we shed light on the issue by revealing a “U-shaped” relationship between the two.

Suggested Citation

  • Qi Huang & Marshall S. Jiang & Jianjun Miao, 2016. "Effect of government subsidization on Chinese industrial firms’ technological innovation efficiency: A stochastic frontier analysis," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 17(2), pages 187-200, April.
    • Handle: RePEc:taf:jbemgt:v:17:y:2016:i:2:p:187-200
    DOI: 10.3846/16111699.2015.1061590
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    2. Linjie Feng & Huangxin Chen & Yuriy Bilan & Salahuddin Khan & Weipeng Zhan, 2024. "Green innovation: the role of government subsidies under the system of digital finance -based on a zero-inflated negative binomial model," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(11), pages 29621-29642, November.
    3. Wang, Mei Ling, 2023. "Effects of the green finance policy on the green innovation efficiency of the manufacturing industry: A difference-in-difference model," Technological Forecasting and Social Change, Elsevier, vol. 189(C).
    4. Di Wang & Wei Dou, 2024. "Investigation on how carbon markets and digital transformation affect green innovation: evidence from Chinese listed companies," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(9), pages 22775-22800, September.
    5. Yongli Zhang & Sanggyun Na & Jianguang Niu & Beichen Jiang, 2018. "The Influencing Factors, Regional Difference and Temporal Variation of Industrial Technology Innovation: Evidence with the FOA-GRNN Model," Sustainability, MDPI, vol. 10(1), pages 1-19, January.
    6. Wang, Nannan & Gong, Zheng & Xu, Zhuhuizi & Liu, Zhankun & Han, Yu, 2021. "A quantitative investigation of the technological innovation in large construction companies," Technology in Society, Elsevier, vol. 65(C).

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