Public selection and research and development effort of manufacturing enterprises in China: state owned enterprises versusrnnon-state owned enterprises

摘要

This paper investigates the allocation of public subsidies and firms’ research andrndevelopment (R&D) effort. Considering the reality of China, we focus on therncomparison between state owned enterprises (SOEs) and non-state owned enterprisesrn(SOEs). We apply a variety of propensity score matching methods to a large sample ofrnChinese manufacturing firms. We find strong evidence that the allocation of publicrnsubsidies is biased towards SOEs. Meanwhile, SOEs tend to maintain higher levels ofrnR&D investment than matched non-SOEs. Though the empirical results are consistentrnwith the existing literature which suggests that firms with higher levels of R&Drninvestment are more likely to get supported by public agencies, our findings evidencedrnfrom China indicate it is the strong political connections and less informationrnasymmetry associated with state ownership that sees public subsidies allocated, ratherrnthan the “picking the winner” strategy implemented by public agencies.