The government R&D subsidies and China’s regional innovation output

Purpose: Government R&D subsidies is a major practice to respond to market failures in most countries. The purpose of this study is to examine the effect of the government subsidies on China’s regional innovation output empirically under the regional innovation framework, for the unique regional innovation system and strong national influence of state during the period of transformation. Design/methodology/approach: Based on the construction of regional innovation framework, this study empirically examined the effect of Chinese Government R&D subsidies on regional innovation during the economic transition period using the Bayesian model averaging method and carried out the robustness test under different priori assumptions. Findings: The empirical results showed that R&D capital and human investment has a very significant impact on promoting the regional innovation output of China’s high-tech industries. Meanwhile, the Chinese Government's R&D subsidies failed, thus the goal of improving regional innovation output has not been achieved. In reverse, the effects of regional economic development level and the financial environment on regional innovation are negative but the explanatory power is minimal. Additionally, opening-up has greatly promoted regional innovation output. Originality/value: The empirical findings provide scientific policy decision-making and management implications for government and firm, respectively, and its experience is a very important reference for other emerging economies. Additionally, China serves as an interesting case to examine whether government R&D subsidy is effective in an immature market.