Abstract: Based on the micro-data of the strategic emerging industries from 2006 to 2013, this paper makes a quantitative measurement of the effect of financing constraints and government R&D subsidies on corporate R&D investment within the unified framework of the two-tier stochastic frontier model. The results show that, on average, the government R&D subsidies can smooth but not completely offset the negative effects of financing constraints on R&D investment; the corporate R&D investment of the strategic emerging industries is still insufficient. However, there are also 1/4 firms in which the positive effect of government R&D subsidies on R&D investment is bigger than the negative effects of financing constraints on R&D investment. Further studies show that the incentive effect of government R&D subsidies has significant heterogeneity among different firms, therefore, the government should be more cautious and targeted when making subsidy policies.

Key words: financial constraints; government R&D subsidies; R&D investment; strategic emerging industries; two-tier stochastic frontier model