Preprint Article Version 1 This version is not peer-reviewed

The Government Support and the Innovation of the New Energy Firms

Version 1 : Received: 9 May 2017 / Approved: 10 May 2017 / Online: 10 May 2017 (18:04:33 CEST)

How to cite: Du, W.; Li, M. The Government Support and the Innovation of the New Energy Firms. Preprints 2017, 2017050091 (doi: 10.20944/preprints201705.0091.v1). Du, W.; Li, M. The Government Support and the Innovation of the New Energy Firms. Preprints 2017, 2017050091 (doi: 10.20944/preprints201705.0091.v1).

Abstract

Government support plays an important role in Chinese economy. New energy industries, concerning innovation-driven source and environmental protection, are also supported by government. This paper aims to study the effects of the traditional government support at supply side on firms’ innovation and development. In this paper, we propose enterprise behavior model including characteristics of new energy industries, and study the innovation reaction of firms to government support in different situation. We further use propensity score matching to verify the results in theoretical model, and conduct robustness analysis. Our main conclusions include: (1) In the normal years government support can only promote the innovation output of firms which have innovated, however, can not promote the innovation probability of firms which have not innovated. That is to say, government support can only enhance the intensive margin of innovation, but can not enhance the extensive margin of innovation with less competition. (2) In the situation of bad economic environment and intense competition, firms’ innovation probability rises as the government support increase. Therefore, government should provide more R&D special subsidies and implement strict financial supervision to make the effectiveness of support policies especially in the normal years.

Subject Areas

Government support; Innovation probability; Innovation destiny; Propensity score matching

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