Public RD Subsidies, Firm Innovation and Firm Performance - Empirical Evidence from Listed Companies in China's SME Board

摘要

One of the features of R&D investment is that the output has the properties of public goods, and its private rate of return to be lower than its social rate of return. Therefore, public R&D subsidies play an important role in the performance of SMEs. In this paper, we study the effects of public R&D subsidies on firm innovation in the transition economies, and verify whether public R&D subsidies can directly impact on the SME performance. We undertake this empirical research on the role of public R&D subsidies among SMEs in China. The empirical evidence based on a data set (2007-2008) from the Listed Companies in Chinaȁ9;s SME Board. The regression analyses show significant positive effects of public R&D subsidies on firm innovation but not directly effects on firm performance. At the same time, this result also indicates that there is a strong link between firm innovation and firm performance. Although its direct contribution to firm performance is insignificant, public R&D subsidies contributes indirectly to firm performance by promoting firm innovative expenditure.