Peer effects in government R&D subsidies: evidence from the awareness-motivation-capability perspective

ABSTRACT Previous studies have investigated the factors that influence firms’ decision engaging in government innovation programme, but some important horizontal factors have been largely ignored, such as the effect from industry peers. Based on signal theory and expectancy theory, this paper studies the role of industry peers who have obtained government R&D subsidies in raising awareness and motivation of other non-funded firms to engage in the same project. Using Chinese listed firms between 2008 and 2016 as the empirical sample, this paper introduces the awareness-motivation-capability (AMC) framework and uses the Logit regression to examine the associations between peer effects and strategy choice. The empirical results indicate that the number of funded firms in an industry and their superior performance have positive impact on non-funded firms to obtain government R&D subsidies, and these relationships are further strengthened by non-funded firms’ innovation ability and profitability. This study makes contributions to literature on government R&D subsidies and peer effect by providing a view of imitation behaviour in innovation activities.