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  • August 2023
  • Article
  • Management Science

Anti-Corruption, Government Subsidies, and Innovation: Evidence from China

By: Lily Fang, Josh Lerner, Chaopeng Wu and Qi Zhang
  • Format:Print
  • | Pages:26
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Abstract

We leverage an exogenous shock—the crackdown on corrupt Chinese officials beginning in 2012—and examine how the allocation of research subsidies and innovative outcomes were affected. We argue that the staggered removal of provincial heads on corruption charges during China’s anticorruption campaign and the unanticipated departures of local government officials responsible for innovation programs led to plausibly exogenous reductions in corruption. After both events, the allocation of subsidies became more sensitive to firm merit than to corruption and subsidies became more strongly associated with future innovation. Anticorruption efforts and officials’ career incentives improved the efficacy of subsidy programs.

Keywords

Government Subsidies; Research and Development; Innovation and Invention; Crime and Corruption; Government and Politics; China

Citation

Fang, Lily, Josh Lerner, Chaopeng Wu, and Qi Zhang. "Anti-Corruption, Government Subsidies, and Innovation: Evidence from China." Management Science 69, no. 8 (August 2023): 4363–4388.
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About The Author

Josh Lerner

Entrepreneurial Management
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  • The Diffusion of New Technologies By: Aakash Kalyani, Marcela Carvalho, Nicholas Bloom, Tarek Hassan, Josh Lerner and Ahmed Tahoun
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  • Impact Investing and Worker Outcomes By: Josh Lerner, Markus Lithell and Gordon M. Phillips
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