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Government Support and R&D Investment Effectiveness in Chinese SMEs: A Complex Relationship

Author

Listed:
  • Claudio Petti

    (University of Salento)

  • Lauretta Rubini

    (University of Ferrara)

  • Silvia Podetti

    (Institute of Management Scuola Superiore Sant’Anna)

Abstract

This paper investigates the combined role of innovation support policies and firm's own innovative activities on the performance of Chinese small- and medium-sized enterprises (SMEs) in high-tech sectors. By distinguishing two components of innovative activities—research and development (R&D) investments and embedded innovative capacity—the paper develops and tests an integrative moderated moderation model. The results suggest that in Chinese high-tech SMEs innovation-support policies positively moderate the relationship between R&D investments and performance, but this positive effect diminishes when there are higher levels of embedded innovative capacity. These results highlight that the relationship between government innovation policies and a firm's own R&D investments is not only reciprocal but also more complex than the one so far analyzed in the literature. The results show in particular that the effects of innovation-support policies on R&D investments is not as neat as it seems, because of the internal balance within the firm between investment in R&D and other sources of innovation. Therefore, although innovation support policies have been found to help Chinese SMEs in high-tech sectors benefit from their R&D investments, these policies are particularly effective only when R&D investments are significantly driving firms’ innovative activities. This highlights the relevance of both government support and a firm's own efforts in the competitive modernization of Chinese SMEs.

Suggested Citation

  • Claudio Petti & Lauretta Rubini & Silvia Podetti, 2017. "Government Support and R&D Investment Effectiveness in Chinese SMEs: A Complex Relationship," Asian Economic Papers, MIT Press, vol. 16(1), pages 201-226, Winter/Sp.
    • Handle: RePEc:tpr:asiaec:v:16:y:2017:i:1:p:201-226
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    Cited by:

    1. Chenghua Guan & Shengxue Jin, 2023. "Does the Type of Funding Affect Innovation? Evidence from Incubators in China," Sustainability, MDPI, vol. 15(3), pages 1-19, January.
    2. Mukhamad Najib & Abdul Aziz Abdul Rahman & Farah Fahma, 2021. "Business Survival of Small and Medium-Sized Restaurants through a Crisis: The Role of Government Support and Innovation," Sustainability, MDPI, vol. 13(19), pages 1-16, September.
    3. Cátia Rosário & Celeste Varum & Anabela Botelho, 2022. "Impact of Public Support for Innovation on Company Performance: Review and Meta-Analysis," Sustainability, MDPI, vol. 14(8), pages 1-16, April.
    4. Jugend, Daniel & Fiorini, Paula De Camargo & Armellini, Fabiano & Ferrari, Aline Gabriela, 2020. "Public support for innovation: A systematic review of the literature and implications for open innovation," Technological Forecasting and Social Change, Elsevier, vol. 156(C).
    5. Guo, Di & Guo, Yan & Jiang, Kun, 2022. "Government R&D support and firms’ access to external financing: funding effects, certification effects, or both?," Technovation, Elsevier, vol. 115(C).
    6. Zhang, Man & Merchant, Hemant, 2020. "A causal analysis of the role of institutions and organizational proficiencies on the innovation capability of Chinese SMEs," International Business Review, Elsevier, vol. 29(2).

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    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F50 - International Economics - - International Relations, National Security, and International Political Economy - - - General
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • G00 - Financial Economics - - General - - - General

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