Impact of Government Policies on Research and Development (R&D) Investment, Innovation, and Productivity: Evidence from Pesticide Firms in China

Abstract

China’s pesticide industry has played an important role in the growth of agricultural productivity in both China and worldwide, but its development is hampered by production inefficiency and the lack of innovation of active ingredients. To improve innovation and the productivity of the pesticide industry, the Chinese government has implemented a series of policies to stimulate private research and development (R&D) and firm innovation. Using the firm-level panel data of the Annual Survey of Industrial Firms (ASIF) collected by the National Bureau of Statistics in 2001–2007, this study examines the linkages between R&D investment, innovation, and productivity with a focus on the role of government policies. The results show that pesticide firms with a higher intensity of R&D investment were associated with a higher patent intensity, and more innovated firms were associated with a higher productivity. Public research, intellectual property enforcement, production subsidy, foreign direct investment (FDI), and being export oriented were positively associated with the innovation and productivity of pesticide firms.