“Firm Performance and State Innovation Funding: Evidence from China’s Innofund Program” by Dr. Yanbo WANG
Dr. Yanbo WANG
Visiting Assistant Professor of Strategy and Innovation
Cheung Kong Graduate School of Business
Can firms leverage public entrepreneurship investments to improve innovation and financial performance and, if so, which capabilities matter most? Using administrative data on applicants to China’s Innofund program, we (a) identify which features improve firm chances of winning grants and (b) evaluate the causal impact of grants on firm performance via a regression discontinuity (RD) framework. We find that firms whose applications report more innovation and better financial performance and whose founders have political connections are more likely to win funding and that the role of political connection is particularly salient in the years in which the program's funding was boosted but its requirement was relaxed. Further, firms receiving the Innofund grants are associated with higher performance in survival, patenting and securing venture capital investment. However, when selection effects and treatment effects are distinguished, we find (almost) no evidence that Innofund funding helps boost firm performance.