Grabbing or Helping Hand? Effects of Government Subsidies in an Emerging Economy : The Evidence of Cultural and Creative Industries

This study investigates the influence of government subsidies on recipients’ growth potential and subsequent performance in cultural and creative industries (CCIs). We find that CCI firms significantly increase their R&D expenditure after receiving direct government subsidies. Direct subsidy recipients have higher Tobin’s Q values, validating the certification effect. Generally, government subsidies do not improve operating performance, partially because of resultant R&D expenditure and excess employment. Subsidies are beneficial for improving the operating performance of firms with high expenditure, particularly those with financial constraints. Our findings add to the literature on government subsidies and creative economy through firm-level analyses and provide insight to policymakers for enhancing the competency of subsidy recipients and promoting emerging industry’s development