The influence of government R&D subsidies on China’s industrial structural transformation and upgrading: boost or drag?

YUAN Hang1 ZHU Chengliang2,3

(1.College of Business Administration, Capital University of Economics and Business, Beijing, China 100070)
(2.Institute of Quantitative & Technological Economics, Chinese Academy of Social Sciences, Beijing, China 100732)
(3.Project Evaluation and Strategic Planning Research and Consulting Center, Chinese Academy of Social Sciences, Beijing, China 100732)

【Abstract】Implementing an innovation-driven development strategy in an all-round way and promoting industrial structural transformation and upgrading through innovation is the key to promoting the high-quality development of China’s economy. However, innovation often has problems such as market failure and insufficient investment due to its inherent positive externalities and uncertainties. As a general policy for stimulating innovation,whether government R&D subsidies can really help enterprise innovation, and then drive China’s industrial structural transformation and upgrading is the focus of the common concern of the government and academia. Based on the panel data of 31 provincial-level regions in China from 2005 to 2015, we studied the influence of government R&D subsidies on industrial structural transformation and upgrading, and then conducted the heterogeneity tests based on regional differences, firm size, and the nature of enterprises. The results are as follows. (1) Government R&D subsidies have a significant effect on promoting China’s industrial structural advancement and rationalization, which can significantly promote China’s industrial structural transformation and upgrading. (2) The impact of government R&D subsidies on industrial structural transformation and upgrading has obvious regional differences, which can significantly promote industrial structural rationalization in the eastern region and industrial structural advancement in the central and western regions. (3) The government R&D subsidies obtained by large enterprises have a significant effect on industrial structural advancement, while the government R&D subsidies obtained by medium-sized enterprises have the effect of industrial structural rationalization. (4) The government R&D subsidies obtained by domestic-funded enterprises can significantly promote industrial structural transformation and upgrading, while the government R&D subsidies obtained by Hong Kong, Macao or Taiwan invested companies and foreign-invested companies are not significant. (5) The mechanism of action shows that government R&D subsidies have effectively promoted China’s industrial structural transformation and upgrading by significantly enhancing the ability of enterprise innovation. The results of this study show that in the future, more attention should be given to the structural problem of government R&D subsidies while increasing the amount, especially to the small and medium-sized domestic-funded enterprises in the central and western regions.

【Keywords】 government R&D subsidies; industrial structure; advancement; rationalization; heterogeneity;

【DOI】

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ISSN:1001-9952

CN: 31-1012/F

Vol 46, No. 09, Pages 63-77

September 2020

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