DO R&D SUBSIDIES IMPROVE OPERATIONAL PERFORMANCE? NEW EVIDENCE FROM CHINA*

The sustainable development of the digital economy has attracted wide attention. To ex-plore how to improve the operational performance of China's digital firms, this paper conducts an influence mechanism model to test the nonlinear effect, heterogeneity effects, and mediation effects using a panel data of China's digital firms from 2008 to 2017. The empirical results indicate that R&D subsidies have an inverted U-shaped effect on operational performance, and these results are still valid after a series of robustness tests. In addition, we find that R&D subsidies have a heterogeneous effect on operational performance in terms of region, company size, governance structure, and executive education background. Moreover, regarding the influence mechanism, R&D subsidies improve operational performance by improving innovation efficiency. This paper proposes some policy implications to improve the operational performance of China's digital firms.