The impact of government subsidies on R&D investment of listed companies in China's new energy vehicle industry-based on the perspective of industrial chain

ABSTRACTOver the past decade, Chinese government has invested large amounts of government subsidies to support the development of new energy vehicle (NEV) industry. Whether the government subsidy has achieved the expected effect and how to further adjust the subsidy policy to better promote the development of the NEV industry have received wide attention. This paper considers the characteristics of technological innovation and financing constraints of enterprises at different position of the NEV industry chain, and empirically test the incentive effect of government subsidies on R&D investment from the perspective of the industry chain. The research findings show that government subsidies promote the R&D investment of all enterprises in the NEV industry chain, however, the promotion effect on upstream and midstream enterprises is more significant. With the reduction of consumption subsidies, the promotion effect of government subsidies on the R&D investment of listed companies in the NEV industry has been strengthened. Further research finds that government subsidies promote R&D investment by alleviating the financing constraints of upstream and midstream enterprises. There is an industry chain synergy effect in the technological innovation of new energy vehicle enterprises, and government subsidies can promote this synergistic effect from upstream to downstream.KEYWORDS: New energy vehiclesgovernment subsidiesconsumption subsidiesR&D investmentindustrial chainJEL CLASSIFICATION: L62O32O38 Disclosure statementNo potential conflict of interest was reported by the author(s).Notes1 The data source is aggregated by the author from the NEV promotion and application subsidy funds published by the Ministry of Industry and Information Technology of the People's Republic of China during the period of 2010–2022.2 The data is sourced from the China Automotive Chip Industry Innovation Strategic Alliance, https://www.caca-chips.com/xinwenzixun/hangyezixun/86.html.3 The data is sourced from the automotive industry special report 'Industrial Chain Vertical Integration Becomes an Imperative Path for Automakers Under the New Four Modernizations Trend in the Automotive Industry' published by Guangfa Securities, https://www.vzkoo.com/document/20230128849843ffb7356940cfddaad1.html?keyword=%E4%BA%A7%E4%B8%9A%E9%93%BE%E5%9E%82%E7%9B%B4%E6%95%B4%E5%90%88%E6%88%90%E4%B8%BA%E8%BD%A6%E4%BC%81%E5%BF%85%E7%94%B1%E4%B9%8B%E8%B7%AF.4 The new energy industry refers to companies engaged in the production and application of NEV, mainly including upstream raw material suppliers, midstream core parts suppliers and downstream vehicle manufacturers and retailers.5 On May 31, 2010, the Ministry of Finance, Ministry of Science and Technology, Ministry of Industry and Information Technology, and National Development and Reform Commission of China (referred to as: four ministries) jointly issued: 《Notice on carrying out pilot subsidies for private purchase of new energy vehicles》. The Chinese government began to promote NEV on a large scale.6 Four ministries jointly issued:《Notice on continuing the promotion and application of new energy vehicles》.7 Four ministries jointly issued:《Notice on financial support policies for the promotion and application of new energy vehicles from 2016 to 2020》.8 Industrial Classification of National Economy (GB/T 4754-2017), https://www.mca.gov.cn/images3/www/file/201711/1509495881341.pdf.Additional informationFundingThis work was supported by the Research Fund Project of Humanities and Social Sciences of the Ministry of Education in China [grant number: 22YJA630067]; Shaanxi Province Soft Science Research Project [grant number: 2022KRM108].Notes on contributorsHaiyun RenHaiyun Ren earned her PhD in management at Northwestern University in China. Presently, she is a professor and master tutor at International Business School of Shaanxi Normal University in China, researching on the topic of corporate governance and corporate investment and financing decisions.Zenglian LiuZenglian Liu earned her Master's degree in management at the International Business School of Shaanxi Normal University in China. She will pursue a doctoral degree in management at the School of Management, Xi'an Jiaotong University in China. Her research interests focus on technological innovation in enterprises.