Effect of Government Financial Incentive on Firm's Innovation Efficiency : Evidence from China's Photovoltaic and Wind Companies

The potent support from China’s government provides opportunities for the development of China’s photovoltaic and wind power industry and promotes China to become the largest renewable energy investor. Based on the data of 62 listed companies from 2007 to 2020, this paper builds fixed-effect models and PSM models to investigate the effect of government subsidies and tax rebates on the technical efficiency of China’s photovoltaic and wind power companies, as well as the role of R&D investment and operation efficiency. The results indicate that two government support policies have a different impact on the enterprise’s technical efficiency. Government subsidies have significant inhibitory effects on technical efficiency by squeezing out private R&D investment. However, tax rebates significantly boost technical efficiency and operation efficiency plays a mediating role in this function route. Based on these results, it can provide valuable suggestions for improving the government subsidy mechanism of photovoltaic and wind power enterprises and increase their technical efficiency