The Impacts of Government Grants on Firm Behaviors

Abstract

Government grants play a key role in the firm's innovation. It helps the firm to innovate products, improves the firm's development, and promotes the firm's growth. Based on a competition-based government grant program called Innovate UK, I find a significant relationship between government grants and firm behaviors. For the empirical analysis, I adopt OLS (Ordinary Least Square) regression models with the company and time fixed effects. Specifically, the data shows that winning a grant increase the firm's total asset, short-term liabilities, long-term liabilities, and the firm's intangible asset. By showing that government grants can accelerate the innovation and the growth of the firm and the firm's products to some extent, this paper highlights the government's role in shaping the firm's innovation behaviors.