Government subsidies as a policy instrument are used to alleviate market failure in research and development (R&D) activities. We aim to understand the influence of government subsidies on enterprises’ R&D investment and performance. We are also interested in examining how the attributes of enterprise ownership act as a moderating variable for the relationship between government subsidies, R&D investment, and firm performance. We use firm-level data on China’s manufacturing listed companies from 2011 to 2015. The results show that receiving government subsidies improves private R&D investment and firm performance, and state-owned enterprises (SOEs) can obtain more subsidies than private-owned enterprises (POEs). However, the impact of government subsidies on private R&D investment is stronger in POEs than in SOEs of China. In additional analyses, we also examine this relationship by industry, region, subsidy intensity, and R&D intensity. This study has important policy implications for regulators to improve the effectiveness of government subsidies.

https://www.mdpi.com/2071-1050/10/7/2205/pdf

The Impact of Government Subsidies on Private R&D and Firm Performance: Does Ownership Matter in China’s Manufacturing Industry?

The issue concerning the increasing research and development (R&D) investment in emerging markets is especially attractive for many researchers and practitioners. This paper measures and compares the characteristics of Chinese and South Korean R&D expenditures of manufacturing companies from 2012 to 2016. It also examines the impact of R&D investment on firm performance. The results show that debt maturity and cash reserves are positive determinants of R&D investment in China and South Korea. Firm size, internal financing, and debt ratio are restrictive factors of R&D intensity in Chinese manufacturing companies, while debt ratio is the only negative determinant of R&D investment in their South Korean counterparts. The results also show that R&D intensity exhibits a strong positive impact on the performance of manufacturing companies in both countries. Moreover, this impact is stronger in South Korea than in China. In addition, R&D investment has a positive time-lag effect only on the performance of Chinese manufacturing companies. Our study presents some new evidence for the relationship between R&D intensity and firm performance in emerging markets.

Characteristics of Corporate R&D Investment in Emerging Markets: Evidence from Manufacturing Industry in China and South Korea

Would an initial public offering (IPO) in a growing and uncertain industry have a positive or negative effect on directly competing incumbent firms in the industry? We assert that due to the risk and uncertainty inherent in a growing industry, a firm's IPO may send a positive market signal of growing industry demand. An IPO can send a signal to the investors of directly competing incumbents that the market is promising, and incumbent firms will enjoy a better future. If directly competing incumbent firms are capable of capturing these positive externalities, they will experience even greater positive results. In particular, an incumbent firm with a significant research and development investment may capture more of this increased demand in the industry. On the other hand, if a market segment is more concentrated, it is more likely that directly competing incumbents will suffer when another firm announces an IPO. We find supporting results for the various arguments of our initial question examining the computer-related service industry. We also present discussion and implications for our results. Copyright © 2011 Strategic Management Society.

The impact of ipos on the values of directly competing incumbents

This paper analyzes the R&D profile of Indian drug and pharmaceutical industry during the period 2000–2013, and the factors that influence a pharmaceutical firm’s decision to undertake R&D activities. The study period from 2000 to 2013 has been characterized by a rapid growth in industry’s R&D expenditures, as part of the strategic shift, induced by the Patents (Amendment) Act, 2005. Using the real financial data for the top 91 publicly listed Indian domestic pharmaceutical companies, the study provides new evidence on drivers of R&D intensity in Indian Drugs and Pharmaceutical industry.
 A panel data random effects Tobit model along with OLS model using firm fixed effects are applied to identify the factors affecting the RD past cash flow; export and import intensities of the firm tend to significantly impact the R&D intensity. While firm size exhibits a non-linear relationship, cash flow, past innovative output shows a positive and significant relationship with R&D intensity. Further, patent count and firm’s overseas presence, considered as additional important determinants of firm-level R&D intensity, influences R&D positively. Lastly, global orientation of Indian pharmaceutical firms has been found to impact R&D activities considerably.

Firm level R&D intensity: evidence from Indian drugs and pharmaceutical industry

This paper examines the impact of economic policy uncertainty (EPU) on the Australian firm investment activity. We find a significant positive relationship between the EPU and the firm investment o...

The economic policy uncertainty and firm investment in Australia

In our study, we extracted the market, finance, and government factors determining R&D investment of individual firms in the IT industry in Korea. We collected the financial data of 515 individual firms belonging to IT and non-IT industries between 1980 and 1999 from the Korea Investors Service’s database and investigated the empirical relationship between the factors using an ordinary regression model, a fixed effects model, and a random effects model. The main findings of our study are as follows: i) The Herfindahl Index variable representing the degree of market concentration is statistically insignificant in explaining R&D expenditures in the IT manufacturing industry. ii) Assets, which is used as a proxy variable for firm size, have a positive and statistically significant coefficient. These two results suggest that the Schumpeterian Hypothesis may be only partially applied to the IT manufacturing industry in Korea. iii) The dividend variable has a negative value and is statistically significant, indicating that a tendency of high dividends can restrict the internal cash flow for R&D investment. iv) The sales variable representing growth potential shows a positive coefficient. v) The subsidy as a proxy variable for governmental R&D promotion policies is positively correlated with R&D expenditure. This suggests that government policy has played a significant role in promoting R&D activities of IT firms in Korea since 1980. vi) Using a dummy variable, we verified that firms reduced their R&D investments to secure sufficient liquidity under the restructuring pressure during Korea’s 1998 and 1999 economic crisis.

https://onlinelibrary.wiley.com/doi/pdf/10.4218/etrij.03.0101.0401

Determinants of Corporate R&D Investment: An Empirical Study Comparing Korea's IT Industry with Its Non-IT Industry

We present a unified explanation of the internationalization strategies of major mobile network operators (MNOs). We have developed a framework that analyzes the strategies of major international MNOs in terms of the relationship between their degree of involvement in international business operations and the degree of equity participation. The results show a positive association between these two dimensions as expected, but they also reveal some exceptional cases in which certain MNOs are actively involved in the business operations of other foreign MNOs, even with minor (or zero) equity investments. In this paper, we argue that the strategic actions of the major MNOs which are the largest shareholders of foreign MNOs are in an equilibrium status because these major MNOs derive maximum benefit from full or considerable management control and active involvement. Finally, we predict that latecomers (MNOs who are just about to enter foreign telecommunications markets) may adopt an incremental investment approach because most developed markets and deregulated emerging markets with growth potential are already preempted by major MNOs. Therefore, the window of opportunity for internationalization in those markets is currently small.

https://onlinelibrary.wiley.com/doi/pdf/10.4218/etrij.09.0108.0451

Myeong-Ho Lee

Papers

Determinants of Corporate R&D Investment: An Empirical Study Comparing Korea's IT Industry with Its Non-IT Industry

Strategic Differentiation of Internationalization in the Mobile Telecommunications Industry: Case Studies