An Evolutionary Game Simulation of a Composite Subsidy Policy to Promote Military-Civilian Integration: A National System of Innovation With Chinese Characteristics

Abstract

Collaborative innovation involving military and civilian actors is a key component of National Systems of Innovation. It is an approach that is explicitly promoted in China under the name of Military-Civilian Integration. To more effectively promote Military-Civilian Integration, it is necessary to study the impact of government subsidies on enterprise-level behavior. The research reported in this paper analyzes a composite subsidy policy's influence on the cooperative innovation behavior of military and civilian enterprises with game theory. First, during the early stage of development, an R&D subsidy can stimulate firms to invest in technological innovation, but it harms the long-term and stable development of civil-military cooperation by encouraging free-riding behaviors. Second, as military-civilian integration continues and deepens, the input-output rate of the R&D will increase, and this makes the role of tax subsidies increasingly relevant. Third, the composite application of scale and tax subsidies will be most effective in reinforcing innovation during the Industrialization Stage. Fourth, further simulations show an apparent heterogeneity in the responses of the military enterprise and the civilian enterprise to the three kinds of subsidy that we have considered. Civilian enterprises are more sensitive to subsidies, while military enterprises are more sensitive to technology spillovers. Therefore, the government should build a military-civilian integration platform to share resources in ways that maintain security confidence and improve the R&D input-output rate. The government should strengthen confidentiality management, training, and risk prevention and control measures for military-civilian integration projects, to reduce the risk of technology spillover.