Policy incentives, government subsidies, and technological innovation in new energy vehicle enterprises: Evidence from China

As the first step toward establishing the development of new energy vehicles (NEVs) as a national strategic priority, China's New Energy Vehicle Pilot City (NEVPC) policy has far-reaching significance for helping to develop China's capabilities in NEV industry. The existing literature focuses on the city- and industry-level impacts of this policy but ignores the important role of individual enterprises as innovation agents. In addition, in assessing the policy's effects technological innovation for NEV enterprises is typically measured in terms of output quantity, with no emphasis on innovation efficiency. This study uses balanced panel data from 2006 to 2020 covering 196 listed Chinese NEV enterprises to examine the mechanism and impact of the NEVPC policy on technological innovation within NEV enterprises. We show that the policy has achieved the goal of expanding government subsidies and had a significantly positive impact on the number of technological innovations produced by these enterprises, via a partial mediation effect. However, neither the policy nor the mechanism of government subsidies is effective in improving the efficiency of technological innovations for NEV enterprises. These results have important implications for formulating and improving policies for the NEV industry.