Government subsidies, R&D investment and innovation performance: analysis from pharmaceutical sector in China

Abstract

Government subsidies play a vital role in enhancing firms’ investment in research and development (R&D). The study’s aim is to investigate the relationship between government subsidies (including government R&D and non-R&D subsidies), R&D investment and innovation performance of Chinese pharmaceutical listed companies over the period 2009–2015. The results show that government R&D subsidies can stimulate corporate R&D investment; government subsidies have no significant impact on innovation performance while R&D investment has a positive impact. In addition, we examine whether company ownership and executives’ technological experience affect this relationship. We also find that there is a positive relationship between government R&D subsidies and R&D investment only in private-owned companies; R&D investment positively influences innovation performance in state-owned companies or in companies with R&D executives. This study provides some insights for managers and policymakers in making effective innovation strategies.