Ownership, government R&D, private R&D, and productivity in Chinese industry

This paper examines the relationship between research and development (R&D) expenditure and productivity in China's enterprises. An empirical model that contains a system of three equations, i.e., the production function, a private R&D equation, and a government R&D equation, is estimated using a cross-sectional data set fur Chinese enterprises of various ownership types. We And a strong link between private R&D and timm productivity Although its direct contribution to firm, productivity is insignificant, government R&D contributes indirectly to productivity by promoting private R&D. Hence. providing incentives for enterprises to invest in R&D may be a better alternative than providing R&D grants directly. J. Comp. Econ., March 2001, 29(1), pp. 136-157. National University of Singapore, Singapore 119260,Singapore. (C) 2001 Academic Press.