Learn from whom? The roles of government R&D subsidies and organizational reputations

Abstract Although studies have supported the benefits of learning from peers, how firms identify and determine specific peers for learning is unclear. Drawing on signalling and organizational learning theories, we investigate the effects of receiving government R&D subsidies on the knowledge adoption of rivals. In the framework of signalling theory, gaining a government R&D subsidy is conceptualized as a signal indicating a positive quality and legitimacy attribute that distinguishes the recipients from their rivals. Employing a dataset of Chinese listed firms, we find that recipients’ knowledge is adopted more by rivals after receiving government R&D subsidies. Furthermore, from the perspective of firms’ reputations, this study offers a contingent framework by revealing that this impact will be more pronounced for recipients who are market leaders, technology leaders, and have political connections. This study contributes to the literature on inter-firm learning and the government R&D subsidy literature on externalities, which offers practical implications.