1. Introduction
Government investment in R&D is an important factor in technological innovation [
1]. China has been the second biggest country in R&D investment in the world, with its R&D expenditure has already reached 131.56 billion yuan. However, China is not yet a technological power in the world, lacking in core technology, original scientific and technological capabilities, more than 32% of 130 kinds of key basic materials in China are still blank, and the R&D Efficiency needs to be improved. For example, the total number of international papers and citations published by Chinese scientists and technicians ranked second in the world from January 2007 to October 2017, but the average number of citations per paper (9.4 times) did not reach the world average (11.8 times), showing that the quality of Chinese scientific papers was not high. According to the National Medium and Long-Term S&T Development Plan (2006–2020), the R&D input intensity of China will reach 2.5% by 2020. With the quantitative growth of R&D investment in China, how to transform R&D input into innovation output is attracting great attention, and R&D efficiency is becoming increasingly important in China.
European countries have an absolute advantage in technological innovation capacity, occupying eight of the top 10 in the 2017 global innovation index rankings. Switzerland, Sweden and Germany are representative countries, ranking first, second and ninth respectively. While China ranked 22nd. We make a more detailed comparison of R&D indicators between Sweden, Germany and China, taking the results of 2015 as an example (See
Figure 1). In both researchers in R&D and scientific and technical journal articles, China is obviously lower than Sweden and Germany. In addition, the R&D intensity is only 2.066%, a distance from our target (2.5% in 2020) and farther away from Sweden and Germany. The Chinese government has paid more attention to and increased investment in the field of R&D. China’s R&D budget was about 100.6 billion dollars in 2015, much more than Germany (16.87 billion dollars) and Sweden (337 million dollars). The most notable feature of China’s national science and technology innovation system is that the Chinese government plays an important role, and the R&D investment intensity of Chinese enterprises is low, which is quite different from or even contrary to that of European countries. Therefore, it is necessary and meaningful to study the efficiency of R&D in China from the perspective of government competition.
The topic of R&D efficiency has received increasing academic interest in recent years all over the world [
2,
3,
4,
5,
6,
7,
8,
9]. Most of the previous studies on this topic have attempted to measure R&D efficiency or productivity at the firm or industry levels [
10,
11,
12,
13,
14,
15,
16], as well as country or national level [
17,
18,
19]. In this study, however, R&D productivity is measured at the provincial level to provide R&D policy implications. Several studies proposed that national or regional innovation system has an important effect on R&D efficiency indices [
18,
20,
21], while the national or regional innovation system of China is characterized by government competition, which is an important system design that affects the efficiency of resource allocation. To some extent, the competition of local governments for economic growth explains China’s economic growth miracle. The central government stimulates local governments to compete horizontally for the “yardstick” (GDP or GDP growth), called “yardstick competition” [
22,
23], which affects the efficiency of financial resources allocation. There is no doubt that competition can promote the efficiency. Local government competition helps to improve the supply of public goods, the allocation of economic resources and the efficiency of the public sectors [
24,
25]. As the main means of local government competition [
26,
27,
28], public finance expenditure competition (fiscal competition) can improve infrastructure and the quality of public services, promote industrial agglomeration, expand the scale of foreign investment, affect the export situation, and promote economic development [
29,
30,
31]. Government investment in R&D are public goods, and it is still a question that whether government competition can improve R&D efficiency. In addition, with the existence of the strategic interaction between jurisdictions, externalities of public goods and interregional fiscal expenditure spillover effect [
32,
33], could government competition promote the spatial spillover of efficiency? This is very worthy of discussion.
Therefore, this paper focuses on analyzing the impact of government competition on R&D efficiency in China. We develop a moderating effect model of legal environment to capture the normative role of the legal environment in government competition. First, we apply the Data Envelopment Analysis (DEA), a typical efficiency analysis methodology to estimate R&D efficiency. DEA does not need to explicitly assume a functional relationship between inputs and outputs and has advantages in dealing with multiple inputs and outputs [
1]. We measure the efficiency level of 30 provinces in China, assumed decision-making units (DMUs). Second, we examine whether there is spatial dependence of R&D efficiency. If it exists, we will have to construct Tobit spatial econometric model because the latent variable, R&D efficiency scores are censoring from below at 0, also because of the spatial dependence, the linear model based on Ordinary Least Squares (OLS) are biased. Third, the relationship between government competition, legal environment and R&D efficiency is tested.
The contributions of this paper to existing literature are as follows. First, this article provides a relatively novel research perspective of government competition for the study of R&D efficiency. Different from western countries, local governments have played a leading role in China’s national science and technology innovation system. It is of interest whether government competition could affect the efficiency of R&D investment and how it works. Second, we seek to explore the spatial effect and historical evolution of R&D efficiency and analyze its spatial agglomeration pattern. Current studies mainly focus on the measurement and evaluation of R&D efficiency and few studies have explored the spatial effect and used spatial econometric models to study R&D efficiency. Third, this study analyzes the effect of government competition on R&D efficiency in difference regions and the differences. This study also investigates the impact of law environment on the relationship between government competition and R&D efficiency. Our findings have important implications for local government officials when they implement policies to promote R&D efficiency and build strong provinces of science and technology.
The rest of this paper is structured as follows.
Section 2 is the theoretical analysis and research hypotheses. We have the research design in
Section 3, which is followed by the R&D efficiency analyses in
Section 4.
Section 5 is presentation and discussion of results. Finally, in
Section 6, conclusions, limitations and future research avenues are discussed.
6. Conclusions and Implications
China has been the second largest R&D investment country in the world for several years, but it is still not a powerful country in R&D. The efficiency of R&D is thought-provoking. Considering that the government has made important decisions under China’s technological innovation system and local government competition is an important feature of regional R&D innovation system, we study the efficiency of R&D from the perspective of government competition. This paper constructs a spatial econometric model with moderating effect, and empirically tests the influence mechanism of government competition and legal environment on R&D efficiency based on the background of China-style fiscal decentralization and the panel data of 30 provinces in China from 2008 to 2016. In summary, we find the following: (1) There exists spatial dependence of R&D efficiency, and the regions with high efficiency have “spillover effect” on the surrounding areas. (2) Government competition has a significant positive impact on R&D efficiency and/or R&D efficiency spillover. Specifically, government competition has both R&D efficiency promotion and R&D efficiency “spillover” promotion in Eastern China, only R&D efficiency positive spillover promotion in Middle-area and R&D efficiency promotion but negative spillover in Western China. (3) The impact of government competition on efficiency is affected by the legal environment, the promotion effect of government competition only exists in the good legal environment.
Based on our research in this paper, we make the following policy recommendations. Firstly, from the perspective of spatial agglomeration and spillover of R&D efficiency, it is recommended to perfect the top-level system design and optimize the spatial layout of S&T resources. More S&T resources should be allocated priority to efficient areas. It is encouraged to strengthen the learning and cooperation among provinces and regions to fully release the spatial spillover effects of R&D efficiency. Secondly, from the relationship between government competition and R&D efficiency, it is important to optimize the incentive mechanism of the promotion system for local officials, build an innovative and competitive government, encourage local governments to compete around the important indicators of S&T innovation. It is proposed to strengthen the R&D efficiency orientation and innovate the performance evaluation mode and put the efficiency index and major achievement index of R&D into the key points of local leading cadres’ performance assessment. Thirdly, the legal environment does matter to promote R&D efficiency in China’s innovation system. It is critical to improve the level of legal environment by strengthening S&T legislation and improving laws and regulations such as the Law on Scientific and Technological Progress and the Law on the Protection of Intellectual Property Rights. In addition, legal institutional framework of incentive and restraint for local governments’ competition are ought to be established and optimized, and the orderly and rational competition of local governments should be guaranteed by the good legal environment as to achieve the harmony and unity of benign competition, efficiency promotion and legal regulation.
This study has a lot of limitations that need to be pointed out. Most importantly, the time series is long enough, however, the data we used is only up to 2016. The fact is that China’s science and technology progress is very fast, especially in recent years. Therefore, the issue of R&D investment or R&D efficiency may change a lot. For instance, the nineteenth National Congress of the Communist Party of China held in 2017, new policies on R&D investment may have great impacts on R&D activities of local governments. The results describe the past and the reality is another 2 years, which might be crucial. Another shortcoming of this study lies in the application of research findings. The impact of government competition on R&D efficiency may only exist in China because of China’s unique local government competition system and science and technology innovation system. It may be hard to get the same conclusion in other countries or areas. In the future, if more latest data especially after 2017 is obtained, more accurate efficiency measurements and efficiency trend analyses will be possible. In addition, the path of government competitive behavior affecting the R&D investment or efficiency of local and neighboring regions needs to be further explored.