Impact of Government Support & International Trade on Firm's R&D Investments: Evidence from Chinese High-Tech industries

Innovation is the key approach for firms to achieve sustainable competitive advantage. In this study, we analyse the role of government support and firms' international trade activities in relation to their private R&D investments (RDIs) using data from 1, 111 firms high-tech industries in 2003-2005, China. The empirical results indicate that public R&D subsidies and disembodied technology imports positively and significantly impact RDIs, non high-tech product exports and embodied technology imports have negative effects on RDIs although the latter is not significant. Moreover, the results also show that tax incentive and high-tech product exports both positively associate with RDIs but not significantly. These findings are somewhat different from the ones in extant literature. Explanations of these results are identified and the research implications for government policy are considered.