Do government grants promote innovation efficiency in China's high-tech industries?

Despite extensive discussion about the important role of government in enterprise development, the function of government grants in the innovation activities of high-technology (high-tech) industries is still unclear. In this paper, the stochastic frontier model and a unique panel data set of 17 high-tech industries in China spanning the 2001-2011 period are applied to explore how government grants affect the innovation performance of these industries. Results indicate that the innovation efficiency of high-tech industries rapidly improved in the past decade. However, it is found that government grants exert a negative influence on innovation efficiency of high-tech industries. However, the impact of private R&D funding is significant and positive. Furthermore, when the high-tech industries are grouped into five subindustries, the results show that government grants had different effects on the innovation in each sub industry. (C) 2016 Elsevier Ltd. All rights reserved.