Firm size and R&D subsidy incentives: evidence from China

Abstract

Empirical evidence on the effectiveness of R&D subsidies to firms has produced mixed results so far. The main question is whether public funds stimulate R&D subsidies on firm R&D expenditure or simply crowd out privately financed R&D. Empirically, we investigate the average causal effects of R&D schemes in China. We find evidence suggesting that the R&D subsidies greatly stimulated company-financed R&D expenditures for small firms but had a negative effect on the R&D of large firms, although not statistically significant.