Giving fish or teaching to fish? An empirical study of the effects of government research and development policies

This study compares how government research and development (R&D) subsidy and knowledge transfer from universities and public research institutions stimulate a firm's new product development. More importantly, we emphasize that the effects of these governmentalR&Dpolicies on new product development can be achieved not only directly, but also via a mediating role – a firm's innovation capability. Furthermore, we test how other external knowledge sources (such as knowledge from universities and public research institutions) interact with governmentR&Dsupport to stimulate new product development. The results, based on an investigation of 270Chinese firms, suggest that both governmentR&Dsubsidy and knowledge transfer from universities and public research institutions enhance new product development. The results also show that although governmentR&Dsubsidy and knowledge transfer from universities and public research institutions has a direct impact on new product development, innovation capability does mediate the above relationships. Moreover, unlike the findings that other external knowledge sources have a direct influence on new product development as indicated by the previous literature, our findings suggest that external knowledge sources substitute with the governmentR&Dsubsidies and complement with knowledge transfer from universities and public research institutions. The results confirm the old sayings that teaching to fish (knowledge transfer from universities and public research institutions can complement with other external knowledge sources) is much better than giving fish (governmentR&Dsubsidies substitute other external knowledge sources). This paper enriches current literature of governmentR&Dsupport policies to firm new product development by providing empirical evidences.