The Effect of Government Subsidies on Innovation Capability of the New Energy Vehicle Industry

Abstract

Countries all over the world are paying attention to the growth of the new energy vehicle industry and implementing various subsidy policies to stimulate industry development to enhance the new energy vehicle industry’s innovative capability. This study uses a network DEA model to analyze China’s new energy vehicle industry’s technological innovation capability, decomposing it into two stages: technology development and innovation transformation, and calculating the innovation capability level of China’s new energy vehicle industry from 2012 to 2017. The findings show that due to a disconnect between the efficiency of the technology development stage and the efficiency of the innovation transformation stage, innovation technology cannot serve business operations, resulting in China’s new energy vehicle industry’s overall low level of innovation capability. Based on this, an IT3SLS analysis of the factors influencing innovation capability and phase-by-phase efficiency reveals that while China’s new energy vehicle industry’s subsidy policy has historically failed to significantly improve innovation capability, there is a complementary/substitution effect between labor input, corporate capital, and government subsidies. Based on the findings of this study, important policy recommendations are made to further develop the technological capabilities of the new energy vehicle industry in the context of China’s present new energy policy.

Keywords

• government subsidies, innovation capability, new energy vehicle, network dea