The distinct signaling effects of R&D subsidy and non-R&D subsidy on IPO performance of IT entrepreneurial firms in China

Jin Chen, Cheng Suang Heng, Bernard C.Y. Tan, Zhijie Lin

Research output: Journal PublicationArticlepeer-review

64 Citations (Scopus)

Abstract

This study investigates how R&D subsidy and non-R&D subsidy affect entrepreneurial firms’ initial public offering (IPO) performance in an emerging economy like China. Analyzing data from 269 IT (information technology) entrepreneurial firms in China, we found that R&D subsidy has an inverted U-shape effect on IPO performance, while non-R&D subsidy has a positive effect on IPO performance. Furthermore, both state ownership and patent intensity moderate the inverted U-shape relationship between R&D subsidy and IPO performance. In contrast, neither of them moderates the positive relationship between non-R&D subsidy and IPO performance. These findings contribute to the literature on the effectiveness of government subsidy by highlighting the symbolic effect of government subsidy on external financing in emerging economies, and offer important practical implications to entrepreneurial firms and government funding agencies in China.

Original languageEnglish
Pages (from-to)108-120
Number of pages13
JournalResearch Policy
Volume47
Issue number1
DOIs
Publication statusPublished - Feb 2018
Externally publishedYes

Keywords

  • IPO performance
  • R&D subsidy
  • non-R&D subsidy
  • patent intensity
  • signaling effect
  • state ownership

ASJC Scopus subject areas

  • Strategy and Management
  • Management Science and Operations Research
  • Management of Technology and Innovation

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