Government subsidies, R&D expenditures and overcapacity: empirical analysis in photovoltaic companies

Purpose This study aims to investigate the relationship between government subsidies, R&D expenditures and overcapacity, and to explore the heterogeneity effects in different time periods and different types of companies. It can provide theoretical and practical guidance for the development of the photovoltaic industry. Design/methodology/approach This paper constructs a mediation model to explore the impact of government subsidies on overcapacity and on R&D expenditures, and to propose an indirect way to disentangle the impact of government subsidies on the creation of overcapacity from the positive aspect of increased R&D expenditures. A total of 94 listed enterprises in the Chinese photovoltaic industry were selected as the sample over the period 2012-2019. Findings There was significant overcapacity in the photovoltaic industry. Government subsidies had a positive effect in promoting overcapacity and R&D expenditures. The influence of government subsidies on excess capacity increased and on R&D expenditures decreased over time. Compared with large enterprises, government subsidies the small enterprises received had a greater positive impact on the overcapacity and a smaller positive impact on R&D expenditure. R&D expenditures restrained the influence of government subsidies on overcapacity, but the suppression effect was limited and decreased over time. The indirect effect in small enterprises was greater than that of large enterprises. Originality/value This paper studied government subsidies, R&D expenditure and overcapacity in the same framework and used bias-corrected bootstrapping to explore the path of "government subsidies-R&D expenditures-overcapacity". The heterogeneous effects in different periods and different types of firms are discussed.