energies

Article
The Impact of Enterprise R&D Investment and Government
Subsidies on Technological Progress: Evidence from China’s
PV Industry
Xiang Cai 1 , Jing Li 1, *, Jun Wu 1 , Haijing Zhang 2 , Ping Chen 1 and Xin Huang 3

1 School of Business, Guilin University of Electronic Technology, Guilin 541004, China;

[email protected] (X.C.); [email protected] (J.W.); [email protected] (P.C.)
2 School of Management Science and Engineering, Nanjing University of Information Science and Technology,
Nanjing 210044, China; [email protected]
3 School of Economics and Management, Nanjing University of Aeronautics and Astronautics,
Nanjing 211106, China; [email protected]
* Correspondence: [email protected]

Abstract: China has become the major stakeholder in global photovoltaic (PV) technology. However,
the existing mechanistic interpretation of “what promotes the technological progress of the Chinese
PV industry” is controversial. This paper takes China’s A-share listed PV enterprises from 1999 to 2019
as the research sample and uses a panel fixed-effect regression model to empirically test the impact of
research and development (R&D) investment and government subsidies on the technological progress
of PV enterprises. The results show that there is an “N”-shaped nexus between R&D investment
and technological progress, and most PV enterprises are in the climbing stage of the N-shaped curve.
With the development of the PV industry, the nexus will undergo a transformation from inverted
U-shaped to N-shaped, indicating that R&D investment is a key driver of PV technological progress.
Citation: Cai, X.; Li, J.; Wu, J.; Zhang,
Yet, government subsidies are a “double-edged sword”. They have a significant positive direct effect
H.; Chen, P.; Huang, X. The Impact of
on PV technological progress but also a negative moderating effect. Tax returns play a positive
Enterprise R&D Investment and
incentivizing role, while financial subsidies play a negative moderating role. This study provides a
Government Subsidies on
policy basis for the timely reduction of financial subsidies and increased R&D investment to promote
Technological Progress: Evidence
from China’s PV Industry. Energies
technological progress in China’s PV industry.
2022, 15, 4462. https://doi.org/
10.3390/en15124462 Keywords: government subsidies; R&D investment; technological progress; PV industry;
driving mechanism
Academic Editors: Paweł Dziekański,
Piotr Prus and Mansoor Maitah

Received: 22 May 2022

Accepted: 14 June 2022 1. Introduction
Published: 19 June 2022 PV power generation has the characteristics of being safe, not polluting the environ-
Publisher’s Note: MDPI stays neutral ment, involving a short power station construction cycle, and having fewer environmental
with regard to jurisdictional claims in constraints. Therefore, the substitution of PV power for fossil fuel is desirable [1]. The
published maps and institutional affil- proportion of fossil energy in China’s current energy structure has risen to 84%. However,
iations. clean energy such as wind energy, hydropower, and PV power only accounts for 16%. At
the 75th United Nations General Assembly in September 2020, the Chinese government
announced that it would strive to reach its peak carbon dioxide emissions by 2030 and
achieve carbon neutrality by 2060. The white paper entitled, “Energy in China’s New
Copyright: © 2022 by the authors. Era”, published by the State Council of China in December 2020, was put forward as the
Licensee MDPI, Basel, Switzerland.
leading plan for PV power generation. The aim of implementing this plan is to promote PV
This article is an open access article
power-generation technical progress and provide a powerful engine with which to reach
distributed under the terms and
the peak carbon dioxide emissions and achieve carbon-neutrality goals [2].
conditions of the Creative Commons
By the end of 2019, the cumulative installed capacity of global solar PV power gen-
Attribution (CC BY) license (https://
eration will reach 586.4 GW, with the Asia-Pacific region supplying close to 55.7%. The
creativecommons.org/licenses/by/
Asia-Pacific region has become the main driving force behind global PV development.
4.0/).

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Asia-Pacific region has become the main driving force behind global PV development.
China’scumulative
China’s cumulativesolarsolarPVPVpower
power installed
installed capacity
capacity is 205.5
is 205.5 GW, GW, which
which is three
is three timestimes
the
the installed
installed capacity
capacity of Japan
of Japan (61.8 (61.8
GW) andGW)isand
wellisahead
well ahead of countries.
of other other countries.
For many For years,
many
years, has
China China
been has been ranked
ranked numbernumber oneworld
one in the in theforworld for the installed
the installed capacity capacity
and growthand
rate of solar
growth rate PV power
of solar PVgeneration (Figure 1).
power generation Nine1).
(Figure of Nine
the top-10
of the enterprises in global
top-10 enterprises in
component shipments
global component in 2019inwere
shipments 2019from
wereChina. Chinese
from China. enterprises
Chinese such as
enterprises Jinko
such and
as Jinko
JA
andareJAinare
an in
advantageous
an advantageousposition in terms
position of product
in terms quality,
of product reliability,
quality, performance,
reliability, perfor-
and technological
mance, progress.
and technological The above
progress. The enterprises have actively
above enterprises explored
have actively overseas
explored and
overseas
domestic
and domesticmarkets, and and
markets, theirtheir
growth momentum
growth momentum willwill
become
becomemore andand
more more powerful.
more power-
The
ful. Chinese
The ChinesePV industry
PV industryhas become
has becomeone of theoffew
one theindustries that can
few industries thatsimultaneously
can simultane-
compete internationally
ously compete and gain
internationally andadvantages.
gain advantages.

Figure1.1.Total
Figure Totalinstalled
installedPV
PVcapacities
capacitiesof
ofChina
Chinaand
andthe
theworld.
world.(Adapted
(Adaptedfrom
fromStatistics
Statisticsdatabase
databaseof
of
the
theDevelopment
DevelopmentResearch
ResearchCenter
Centerofofthe
theState
StateCouncil
Councilofofthe
thePeople’s
People’sRepublic
RepublicofofChina
China[3]).
[3]).

China
Chinahashasbenefitted
benefittedfrom
fromtechnical spillovers,
technical the procurement
spillovers, the procurementof theof
most
the advanced
most ad-
production equipment, and the introduction of overseas technical engineers.
vanced production equipment, and the introduction of overseas technical engineers. Chinese
Chi-
enterprises have mastered how to apply technology to efficiently manufacture
nese enterprises have mastered how to apply technology to efficiently manufacture the the modules
in the PV value
modules in the chain. In the
PV value last In
chain. 10 the
years,
lastthe
10 upstream
years, the and midstream
upstream of the global
and midstream of PV
the
industry have transferred to China, and China has become the dominant
global PV industry have transferred to China, and China has become the dominant force force in the PV
global value
in the PV chain.
global Since
value the Since
chain. price the
of PV products
price has fallenhas
of PV products sharply, PV enterprises
fallen sharply, in
PV enter-
the United States, European Union, and other countries are facing increasing
prises in the United States, European Union, and other countries are facing increasing competitive
pressure. A combination
competitive of internal and
pressure. A combination externaland
of internal factors has forced
external factorsmany PV enterprises
has forced many PV
to cease trading or let themselves be acquired by others. This partly explains why global
enterprises to cease trading or let themselves be acquired by others. This partly explains
PV patent applications have declined since 2011, while China maintains sustained and
why global PV patent applications have declined since 2011, while China maintains sus-
rapid growth (Figure 2). A similar but more complex pattern can be found when analyzing
tained and rapid growth (Figure 2). A similar but more complex pattern can be found
patent applications for photovoltaic-related technologies (Figure 3). This shows that the
when analyzing patent applications for photovoltaic-related technologies (Figure 3). This
dependent development pattern of China’s PV industry has shifted to the development
shows that the dependent development pattern of China’s PV industry has shifted to the
pattern of the whole industry chain, and China has become a major stakeholder in global
development pattern of the whole industry chain, and China has become a major stake-
PV technology.
holder in global PV technology.

Energies 2022, 15, x. https://doi.org/10.3390/xxxxx www.mdpi.com/journal/energies

Energies
Energies2022,
Energies 15,
2022,
2022, x 4462
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Figure
Figure2.2.
Figure Percentage
2. distribution
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distribution PV-related
of PV-related
PV-relatedpatents byby
patents
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origin value
and
and chain
value
value segment.
chain
chain segment.
segment.(Repro-
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duced
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Organization,
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2017[4]).
Organization, 2017 [4]).

Firstfilings
Figure3.3.First
Figure filingsofofPV-related
PV-relatedpatents
patentsbybyorigin.
origin.Note:
Note:Horizontal
Horizontal axis—year;
axis—year; vertical
vertical axis—
axis—
Figure 3. First filings of PV-related patents by origin. Note: Horizontal axis—year; vertical axis—
first
first
first filings
filings
filings of
ofof PV-related
PV-related
PV-related patents
patents (number).
(number).
patents (number). (Reproduced
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World
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2017[4]).
Organization, 2017[4]).

Energies 2022,
Energies 15,15,
2022, x. x.
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Energies 2022, 15, 4462 4 of 26

However, there are controversies around why China has become the dominant global
player in the PV industry chain in less than 10 years. According to one view, China’s ability
to replace western countries in the PV industry hinges mainly on its low costs of labor
and electricity, abundant material resources, and the potentially huge market [5]. This
argument is unconvincing, however, since it does not explain why China has achieved
technological progress upstream and downstream of the PV industry chain. In fact, after
years of hard work, China’s PV industry has moved to the forefront of innovation, with
Chinese enterprises also achieving manufacturing advantages. So, labor force factors
and the scale economy are not the only reasons for the rapid development of China’s
PV industry. Ignoring the important role of technological progress constitutes a failure
to understand the real reasons for the rapid rise of China’s PV industry. All emerging
industries face a severe challenge at some point, which leads to a reshuffling of power and
advantage, especially during the “shifting racetrack” stage. Now at this point, product
innovation in the PV industry has entered the “technological trajectory” fueled by the
need to have a leading design. Cost-oriented competition and process innovation have
accelerated the reshuffling of the global PV industry. Process innovation, beyond product
innovation, has become key to gaining a competitive advantage, and market demand is
rapidly expanding.
The comparative advantage of Chinese enterprises in this stage during the last 10 years
is obvious. Since 2010, Chinese enterprises have replaced Japanese and German enterprises
at the top spot [6]. The research of Zhao et al. showed that China has made great strides in
PV power-generation technology, especially thanks to some key industry links [7]. Due to
the technological progress of high-efficiency, low-pollution, high-reliability PV cells and
power-generation systems, China’s PV industry has grown rapidly and continues to be
at the forefront of global PV technological progress. The technical potential of solar PV
power generation is almost unlimited theoretically. However, Zheng and Kammen noted
that the R&D intensity of Chinese PV manufacturers is often lower than in other major
countries; the current investment in Chinese PV is mainly focused on manufacturing and
application, rather than R&D [8]. The lack of a focus on R&D led de la Tour et al. to propose
that China’s PV success cannot be attributed to innovation [9] but instead to national
policies and regulations, which have determined the development trajectory of the PV
industry [10]. The Chinese government is good at utilizing industrial policy tools including
government subsidies to support strategic emerging industries. China has thus adopted
a mercantilist policy with massive government subsidies on the PV industry, aiming to
develop the emerging renewable energy industry, achieve energy transformation, and
support the green growth of China’s economy. These government subsidy policies have
not only increased the pace of the PV industry reshuffle but have also led researchers to
propose there are serious legitimacy issues. Germany’s renewable energy policy, potentially
as a result of China’s, failed to foster industrial vitality in the country. For this reason and
more, the Chinese subsidy policy for the PV industry has drawn wide criticism, with trade
restrictions and more from the European Union as the result.
Yet, how exactly has this happened? Why has China’s PV industry achieved such a
rapid rise? Considering the huge potential of China’s PV industry and its importance in the
energy transition, the mechanisms through which government subsidy policies and R&D
investment have influenced technological progress in China’s PV industry are obviously
interesting. To explore those, this paper constructs a hypothetical conceptual model, as
shown in Figure 4.
Energies 2022, 15, x FOR PEER REVIEW 5 of 28
Energies 2022, 15, 4462 5 of 26

Figure 4. Hypothetical conceptual model. (Source: Created by authors).

Figure 4. Hypothetical conceptual model. (Source: Created by authors).
The main contributions of this paper are as follows: First, our empirical evidence
shows The main
that contributions
although there is of this paper “N”-shaped
a non-linear are as follows: nexusFirst, our empirical
between evidence
R&D investment
shows that although
and technological there for
progress is aChinese
non-linear “N”-shapedthe
PV enterprises, nexusvastbetween
majority R&Dof PVinvestment
enterprises
and
are at technological
the front end progress
of the for Chinesecurve.
N-shaped PV enterprises,
With thethe vast majority
development ofofthePVPV enterprises
industry,
are
there is a transition from an inverted U-shaped to an N-shaped nexus. This provesthere
at the front end of the N-shaped curve. With the development of the PV industry, that
is a transition
harnessing R&Dfrominvestment
an invertedtoU-shaped to an N-shapedprogress
achieve technological nexus. Thisis anproves that harness-
important driving
ing
force R&D for investment
China’s PV to achieveand
industry, technological
it providesprogress
a good is an important
explanation for driving
how China’sforce for
PV
China’s
industryPV industry,
has and it provides
risen rapidly in under a20good years.explanation
Althoughfor how China’s
previous studies PVproposed
industry that
has
risen
China’s rapidly
ability in to
under
replace20 years.
western Although
countries previous
in the PV studies
industryproposed that China’s
has mainly resulted ability
from
to
itsreplace
low costs western
of laborcountries in the PVabundant
and electricity, industry material
has mainly resultedand
resources, frompotentially
its low costs hugeof
market
labor and [5],electricity,
the empirical results material
abundant of this paper correctand
resources, the above ideas.huge
potentially Second, government
market [5], the
subsidies results
empirical are shown to have
of this paperhad a direct
correct and significant
the above positive
ideas. Second, incentivizing
government effectare
subsidies on
technological
shown to haveprogress.
had a direct Thisandpositive and direct
significant effect
positive became particularly
incentivizing obvious after
effect on technological
2013, at which
progress. time theand
This positive supervision
direct effectof various subsidies to obvious
became particularly the PV industry
after 2013, came to be
at which
increasingly
time standardized
the supervision andsubsidies
of various strengthened to theby PVthe Chinese
industry camegovernment. However,
to be increasingly we
stand-
find that government subsidies, mainly financial, have
ardized and strengthened by the Chinese government. However, we find that government a negative moderating effect on
subsidies, mainly financial, have a negative moderating effect on the nexus between R&Da
the nexus between R&D investment and technological progress. This shows that as
“double-edged
investment and sword”, more progress.
technological government Thissubsidies
shows that areasnot necessarily better.
a “double-edged Our study
sword”, more
forms a response
government to theare
subsidies academic voices proposing
not necessarily better. Our thatstudy
government
forms a subsidy
responsepolicies may
to the aca-
excessively
demic voices interfere
proposing withthatthe government
technologicalsubsidyprogresspolicies
of the PV may industry, and itinterfere
excessively also provides
with
a policy
the basis for the
technological Chinese
progress ofgovernment
the PV industry, to implement
and it alsoa financial
provides subsidy
a policyreduction
basis forpolicy
the
at the right time. Third, compared with financial subsidies,
Chinese government to implement a financial subsidy reduction policy at the right time.tax returns, as a “post”-subsidy
method,
Third, are shown
compared to have
with greatsubsidies,
financial advantages taxinreturns,
eliminating
as a negative external
“post”-subsidy effects and
method, are
avoiding efficiency losses. This provides a solution for
shown to have great advantages in eliminating negative external effects and avoiding PV enterprises seeking to avoid
ef-
the double
ficiency dilemma
losses. This of government
provides subsidy
a solution fordependence
PV enterprises and seeking
huge financial
to avoid pressure from
the double
the government.
dilemma of government subsidy dependence and huge financial pressure from the gov-
ernment.The remainder of this article is structured as follows. The following section reviews the
previous literature onofR&D
The remainder this investment and government
article is structured as follows.subsidies, presents section
The following a corresponding
reviews
theoretical analysis, and then puts forward research hypotheses. Section 3 then explains
the previous literature on R&D investment and government subsidies, presents a corre-
the materials and methods used in this study. Section 4 summarizes the empirical results,
sponding theoretical analysis, and then puts forward research hypotheses. Section 3 then
carries out a robustness test, and then conducts data analyses. Section 5 summarizes the
explains the materials and methods used in this study. Section 4 summarizes the empirical
research conclusions and policy recommendations. At the same time, the limitations of this
results, carries out a robustness test, and then conducts data analyses. Section 5 summa-
paper are outlined and directions for future research proposed.
rizes the research conclusions and policy recommendations. At the same time, the limita-
tions of this paper
2. Theoretical are outlined
Analysis and directions
and Research Hypothesis for future research proposed.
2.1. Direct Effect of Enterprise R&D Investment on PV Technological Progress
Endogenous economic growth theory holds that R&D investment is the driving force
of technological progress, and technological progress is the product of accumulated knowl-
edge and experience [11]. Different from neoclassical economic theory, endogenous eco-

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Energies 2022, 15, 4462 6 of 26

nomic growth theory is more focused on R&D investment, and views technological progress
as the result of manufacturers’ active R&D investment to maximize profits. However, there
are still some controversies about the nexus between R&D investment and technological
progress. One view is that R&D investment is a good predictor of technological progress,
which is justified in the following way [12,13].
The strategic emerging PV industry is capital- and technology-intensive. The re-
searcher Kazmerski found that technological innovation and reduced production costs
are sources of advantage for PV enterprises in the current early stage of industry develop-
ment [14]. Yet, this industry is not only full of growth potential but also huge innovation
risks that enterprises must navigate. If they can succeed, focusing on R&D investment to
achieve technological progress and sustainable development is a strong move for PV enter-
prises. The results of the Watanabe et al. study into the Japanese PV industry showed that
through investment plans such as the “Sunshine Project” (1974) and the “New Sunshine
Project” (1993), Japan finally formed a virtuous cycle of “R&D—market growth—price
drop—R&D” [15]. In such a way, R&D investment is both a sign of the beginning of
industrial-technological progress and the basis for the continuous development of tech-
nological advancement capabilities [16]. It is common practice for almost all industries to
gain technological capabilities through R&D investment [17].
Through the joint efforts of policy support and R&D investment from enterprises, it
is proposed that China’s PV industry has successfully realized the transition from policy-
driven to market-driven and has grown into one of the few emerging industries that can
simultaneously compete internationally and build strong advantages in massive industrial
production. The number of international patent applications filed by China’s PV indus-
try shows that its technological capabilities continue to increase, approaching the world
technology frontier [18]. The transformation and upgrading of China’s PV industry attest
to how the key to technological progress in the PV industry may lie in persistent R&D
investment. In support of this, the empirical results of Zhao and Wang verify that the
driving force for the growth of China’s PV industry has shifted from factor input to R&D
investment [19].
The strength of Chinese enterprises’ technological R&D progress is by no means
an overnight effort. Long-term R&D investment by the enterprise is needed to reap the
rewards. Figure 5 illustrates how R&D investment in China’s PV industry has been showing
an upward trend, with the growth rate increasing substantially. According to Blackhawk
PV’s statistics on R&D intensity, in the first half of 2019, the total R&D expenses of 50 listed
PV enterprises accounted for 2.96% of the total revenue (R&D intensity), while the R&D
spending of Sungrow Power and Oriental Risheng was as high as 4–5%. Chinese PV
enterprises clearly seek to increase R&D investment to promote technological progress
in the PV industry. A McKinsey research report comparing the major country origins of
the leading and competitive industries worldwide presented how China’s PV industry
and products comprise its absolute leading industry. This reinforces the notion that R&D
investment is an important driving force for technological progress.
Another view is that the nexus between R&D investment and technological progress
is not simple or linear. Knott asserted that true innovation requires more than just R&D
budgets [20], with a narrow understanding of “what innovation is” and confusion between
innovation and R&D resulting in an overemphasis on the role of R&D investment in
promoting innovation [20]. The researcher put forward a new concept of “R&D IQ”, where
the ability to innovate is determined not by the R&D input or output but also by the
efficiency of those [20]. One research result showed that there is an inverted U-shaped
threshold effect between R&D investment and enterprise technological progress [21], and
Daniel proposed that excessive R&D investment may not match production capacity,
resulting in inevitable waste, with innovation benefits offset by huge expenditures [22]. In
further research, empirical tests found that with an increase in R&D intensity, continuous
R&D investment will generate a “negative—positive—negative” non-linear nexus for
technological progress [23].
Energies 2022, 15, x FOR PEER REVIEW 7 of 28
Energies 2022, 15, 4462 7 of 26

Figure 5. Change trend of R&D investment. (Source: Produced by the authors from the sample data
Figure 5. Change trend of R&D investment. (Source: Produced by the authors from the sample data
using Stata 16.1).
using Stata 16.1).
Yet, elsewhere in the literature, research conclusions of the above literatures hint
Another
at the view of
possibility is that the nexus between
an N-shaped curve ofR&D the investment
nexus betweenand technological
R&D investment progress
and
is not simple or linear.
technological progress. Knott asserted that true innovation requires more than just R&D
budgets [20],this
Hence, with a narrow
paper understanding
puts forward of “what
the following innovation is” and confusion be-
hypothesis:
tween innovation and R&D resulting in an overemphasis on the role of R&D investment
in promoting1 innovation
Hypothesis (H1). There[20].
is anThe researcher
“N”-shaped put between
nexus forwardenterprise
a new concept of “R&D IQ”,
R&D investment and
where the ability
technological to innovate is determined not by the R&D input or output but also by
progress.
the efficiency of those [20]. One research result showed that there is an inverted U-shaped
threshold
2.2. Directeffect
Effectbetween R&D investment
of Government Subsidies on and enterprise Progress
PV Technology technological progress [21], and
Daniel proposed that excessive R&D investment may not match production capacity, re-
Two aspects of the Chinese PV industry are explainable by the direct effect of govern-
sulting in inevitable waste, with innovation benefits offset by huge expenditures [22]. In
ment subsidies on the technological progress of PV enterprises. First, the technological
further research, empirical tests found that with an increase in R&D intensity, continuous
progress of the PV industry has a strong externality. Nelson and Arrow described how
R&D investment will generate a “negative—positive—negative” non-linear nexus for
due to the non-exclusiveness of innovation income, indivisibility of the innovation process,
technological progress [23].
and high risk, innovation resources may not be well allocated and may deviate from the
Yet, elsewhere in the literature, research conclusions of the above literatures hint at
optimal Pareto state, leading market failures to occur. This view provides a theoretical
the possibility of an N-shaped curve of the nexus between R&D investment and techno-
basis for the government to intervene in technological advancement activities. In public
logical progress.
finance theory, the stronger the public goods attribute of the product, the stronger the
Hence, this paper puts forward the following hypothesis:
government’s support. Considering that the PV industry is a strategic emerging industry
with fierce market competition, and the revenue spillover of PV technology progress is
Hypothesis 1 (H1). There is an “N”-shaped nexus between enterprise R&D investment and
prominent, the government has been inspired to use fiscal subsidy tools to plug the gap
technological progress.
between social marginal benefits and costs and reduce the negative impact of externalities.
Second, government subsidies have a funding effect. We contend that government
2.2. Direct Effect of Government Subsidies on PV Technology Progress
subsidies are capital factors that can be used as inputs, most notably to play an incentiviz-
Twoinaspects
ing role guiding of technological
the Chinese PV industryAs
progress. aresuch,
explainable by the
in the early directofeffect
stages of gov-
PV industry
ernment subsidies
development, on the technological
the application progress
of government of PV and
subsidies enterprises. First, the
other policies technological
to support the PV
progress
industry ofhasthe
been PVcommon
industrypractice
has a strong externality.
for major Nelson
PV powers. and Arrow
Government described
subsidies canhow
ease
due to the non-exclusiveness
the difficulties of innovation
in organizing innovation income,
financing, indivisibility
have a smoothingof the innovation
effect pro-
on innovation
cess, and high
investment to risk,
reduceinnovation
the market resources
failure may not
risk of beR&D
the well allocated
activities and
of PVmay deviate from
enterprises, and
the optimal Pareto state, leading market failures to occur. This view
encourage technological progress and scale expansion to quickly corner the market. provides a theoretical
basis Hence,
for the this
government
paper puts to forward
intervene in technological
Hypothesis 2: advancement activities. In public
finance theory, the stronger the public goods attribute of the product, the stronger the
government’s support. Considering that the PV industry is a strategic emerging industry

Energies 2022, 15, x. https://doi.org/10.3390/xxxxx www.mdpi.com/journal/energies

 development, the application of government subsidies and other policies to support the
PV industry has been common practice for major PV powers. Government subsidies can
ease the difficulties in organizing innovation financing, have a smoothing effect on inno-
vation investment to reduce the market failure risk of the R&D activities of PV enterprises,
Energies 2022, 15, 4462 and encourage technological progress and scale expansion to quickly corner the market. 8 of 26
Hence, this paper puts forward Hypothesis 2:

Hypothesis
Hypothesis 2 (H2).
2 (H2). Government
Government subsidies
subsidies have ahave a significant
significant positive
positive promoting
promoting effect
effect on on
techno-
technological progress.
logical progress.

2.3. Moderating Effect of Government Subsidies

2.3. Moderating Effect of Government Subsidies
Existing research shows that as a “visible hand”, government support actions mod-
Existing research shows that as a “visible hand”, government support actions moderate
erate technological progress [24]. This means that the ratio of technological output to input
technological progress [24]. This means that the ratio of technological output to input may
may change with the intensity of government subsidies [25]. Regardless of their intensity,
change with the intensity of government subsidies [25]. Regardless of their intensity,
government subsidies are always a controversial political issue. New Keynesian theory
government subsidies are always a controversial political issue. New Keynesian theory
holds that both the market and government may fail. Government failure is most likely to
holds that both the market and government may fail. Government failure is most likely to
result from high intervention costs, low efficiency, decision-making errors, and corrup-
result from high intervention costs, low efficiency, decision-making errors, and corruption.
tion. China has a mixed economy, that is to say, it does not have a purely traditional and
China has a mixed economy, that is to say, it does not have a purely traditional and planned
planned economical system, and the market also plays an important role in the national
economical system, and the market also plays an important role in the national economy.
economy. Therefore, China is a government-dominated market economy. In that context,
Therefore, China is a government-dominated market economy. In that context, we propose
we propose
that excessive thatintervention
excessive intervention
could harmcould
the PVharm the PVYet,
industry. industry.
looking Yet,
at looking
Figure 6,atitFigure
seems
6,the
it seems the Chinese government has paid sufficient attention to the importance
Chinese government has paid sufficient attention to the importance of developing of de-
the
veloping
PV industry the PV industry
through throughand
long-term long-term
increasing andsubsidies.
increasingIfsubsidies.
it had not,Ifweit had
havenot, we
reason
have
to thinkreason
thattoanthink that anintervening
excessively excessively government
intervening subsidy
government
policysubsidy
wouldpolicy
have not would
only
have
increased the uncertainty in the development of China’s PV industry but also delayedbut
not only increased the uncertainty in the development of China’s PV industry the
also delayed the
technological technological
innovation innovation
process of the PVprocess of though
industry, the PV the
industry, thoughsubsidies
government the govern-may
ment
havesubsidies
stimulated may have
scale stimulated
expansion scale
in the expansion in the short-term.
short-term.

Figure 6. Change trend of government subsidies. (Source: Produced by the authors from the sample
Figure 6. Change trend of government subsidies. (Source: Produced by the authors from the sample
data using Stata 16.1).
data using Stata 16.1).
In general, government subsidy policies may have both positive and negative stimulus
effects on the short-term technological progress of enterprises, but in the long run, they
negatively moderate progress as a whole. The long-term effect of government subsidies
is not only limited but also has a diminishing marginal benefit [26]. In view of this, it is
a wise choice to introduce a subsidy reduction policy when www.mdpi.com/journal/energies
Energies 2022, 15, x. https://doi.org/10.3390/xxxxx the enhancement effect on
technological innovation is no longer significant. It may already be noted that, during the
early development stages of China’s PV industry, many PV enterprises exploited loopholes
in subsidy policies to cheat the government through its subsidies with false projects,
demolition after construction, and shoddy work, and so, in many cases, the subsidy policies
have not exerted the so-called “guidance effect”.
Can government subsidies continue to drive innovation and progress in the PV in-
dustry? Are there differences between different government subsidy methods? Judging
from the actual development of China’s PV industry, government subsidies have indeed
promoted its rapid progress. Yet, we believe that government subsidy policies are a “double-
edged sword”. On the one hand, they have indeed spurred the large-scale expansion of
Energies 2022, 15, 4462 9 of 26

the PV industry. However, on the other hand, excessive government subsidies can be used
inefficiently and delay industrial-technological progress.
Hence, this paper puts forward Hypothesis 3:

Hypothesis 3. (H3). Government subsidies have a negative moderating effect on the nexus between
enterprise R&D investment and technological progress.

3. Materials and Methods

3.1. Empirical Model
The primary concern of the current research was whether enterprise R&D investment
and government subsidies can together promote technological progress in China’s PV
industry. Based on the previous theoretical analysis and research hypotheses and improving
on the paper of Li and Chen [27], this research project refined the relationship between
variables and proposed a nonlinear model. The model setup is as follows.
Model 1:

lnPatentsit = β 0 + β 1 RDIit + β 2 RDIit2 + β 3 RDIit3 + β 4 Xit + µi + νt + ε it . (1)

Model 2:

lnPatentsit = β 0 + β 1 GovSubit + β 2 Xit + µi + νt + ε it . (2)

Model 3:

lnPatentsit = β 0 + β 1 RDIit + β 2 RDI + β 3 RDIit3 + β 4 GovSubit

+ β 5 GovSubit × RDIit + β6 GovSubit × RDIit2 (3)
+ β 7 GovSubit × RDIit3 + β 8 Xit + µi + νt + ε it

where i represents the enterprise, t represents the year, lnPatents stands for technological
progress, RDI stands for R&D investment, RDI2 stands for the square of R&D investment,
RDI3 stands for the cube of R&D investment, GovSub stands for government subsidies, Gov-
Sub × RDI stands for the interaction between government subsidies and R&D investment,
GovSub × RDI2 stands for the interaction between government subsidies and R&D invest-
ment squared, GovSub × RDI3 stands for the interaction between government subsidies
and R&D investment cubed, Xit stands for the control variable vector, µi denotes individual
fixed effects, νt denotes time fixed effects, and εit is a stochastic disturbance team.

3.2. Data Sources and Variable Descriptions

This research was based on enterprise-level panel data from 1999 to 2019, which
included datasets such as the number of patent authorizations, R&D investment, govern-
ment subsidies, and R&D personnel. Of these, the number of patent authorizations was
taken from the China Research Data Service Platform (CNRDS) [28]; the R&D personnel
came from the Wind database [29] and were supplemented with Oriental Wealth [30]; the
financial data related to the enterprise, such as government subsidies, R&D investment,
and the asset-liability ratio, were taken from the CSMAR Data Service Center [31] and
the Wind Financial Database [29], and the data were supplemented to a certain extent
with information from the annual financial reports of listed enterprises. Since the datasets
used were taken from multiple databases, the current study consolidated the data in the
following ways: We found the names and stock codes of all listed enterprises in the PV
industry in the A-share PV concept sector (excluding special treatment enterprises) and
then matched the databases with the stock codes of the PV listed enterprises, merging them
to form the final dataset.

3.2.1. Technological Progress

Technological progress (lnPatents) was the dependent variable. To upgrade their core
competitive ability, enterprises often apply for patents to maintain their technological ad-
Energies 2022, 15, 4462 10 of 26

vantages and so attract greater profits [32]. Therefore, the number of patent authorizations
may be seen as the most direct reflection of innovative activity. Moreover, the authorization
of invention patents, which is closely vetted by patent examiners, necessitates that the
innovation has strong practicability and creativity. Since patent applications are usually
made for commercial purposes, their application and maintenance require a significant
amount of time and high costs, which attest to the applicant’s belief that the patented
innovation can bring them the expected economic returns [33]. Compared with patent
applications, authorized patents thus better represent a creative work achievement and
successful commercialization of this by the inventor(s). To that end, this paper selected
the number of patents authorizations by the enterprise and used the natural logarithm to
measure from this the enterprise’s technological progress.

3.2.2. R&D Investment

R&D investment (RDI) was the independent variable, attesting to the upgrade oppor-
tunities for enterprises [34] and also representing the most important predictive variable of
enterprise technological innovation. Referring to Liu and Jiang [35] and Sun and Wang [36],
this project used the ratio of enterprise R&D expenditure divided by the total operating
income to measure R&D investment.

3.2.3. Government Subsidies

Based on our hypothetical conceptual model (Figure 4), government subsidies have
direct and moderating effects. Government subsidies (GovSub) may largely be divided
into financial subsidies and tax returns, and this paper used the ratio of the total operating
income to the sum of the government subsidies received by the enterprise and the tax
return in the current period, to measure the intensity of the government subsidies [27].

3.2.4. Control Variables

Referring to the previous research, this paper chose the following factors for its research
and analysis: R&D personnel (RDP) [37]), debt-to-asset ratio (Debt) [27], enterprise scale
(lnAssets) [38], operating income growth rate (OIGR) [27], Tobin’s Q (TQ) [27], age of the
enterprise (lnAGE) [39], return on total assets ratio (ROA) [35], and equity ratio (ER) [27].
We used these seven factors as the control variables of the model.
The above variables are presented in Table 1.

Table 1. Variable description table.

Variable Explanation Definition

lnPatents Technological progress lnPatents = ln(Number o f patent authorizations
 + 1)
RDI R&D investment Enterprise R&D expenditure
RDI = Total operating income × 100
GovSub Government subsidies GovSub = Government subsidies : Total operating income
RDP R&D personnel RDP = ln( Number o f R&D personnel + 1)
Debt Debt-to-asset ratio Debt = Total liabilities : Total assets
lnAssets Enterprise asset scale lnAssets = ln( Total assets)
OIGR = (Operating income this year–Last year 0 s operating income) :
OIGR Operating income growth rate
Last year0 s operating income
Tobin’ s Q (TQ) TQ = Enterprise market capitalization : Total assets
Age of enterprise (lnAGE) lnAGE = ln(Years o f establishment)
Return on total assets ratio (ROA) ROA = Net pro f it : Total assets
Equity ratio (ER) ER = Total liabilities : Total owner 0 s equity

3.3. Sample Selection

We chose A-share listed enterprises in the PV industry from 1999 to 2019 as the initial
research sample. Following the methods of Wang and Zhang [40] and Li et al. [41], the
initial sample was screened as follows: (1) we excluded listed enterprises with a severe
lack of variables; (2) excluded listed enterprises with financial abnormalities, such as
special treatment (ST and ST*); (3) excluded listed enterprises that withdrew from the Stock
Energies 2022, 15, 4462 11 of 26

Exchange during the investigation period; (4) excluded enterprises listed after 1999. Finally,
a dataset of balanced panels including 672 observations from 32 listed PV enterprises in the
21 years from 1999 to 2019 was obtained.

4. Empirical Results and Discussion

4.1. Descriptive Statistical Analysis
Table 2 reports the descriptive statistical analysis of the sample variables. Among
these, the dependent variable is technological progress (lnPatents). The average value
of technological progress in the sample can be seen to be 1.435, the minimum is 0, the
maximum is 5.645, and the standard deviation is 1.694, which indicates a wide gap between
the technological progress of the sampled enterprises. Similarly, the independent variable,
R&D investment (RDI), varies from 0 to 12.873, with an average value of 0.691 and a
standard deviation of 1.535, indicating that the R&D investment of listed enterprises in the
PV industry varies greatly. Most of the sampled enterprises have not actively filed research
and development patents, and most seriously lack R&D investment. The government
subsidy (GovSub) varies from 0 to 0.263, with an average value of 0.017 and a standard
deviation of 0.033, indicating that the difference in government subsidies received by PV
enterprises is again large.

Table 2. Descriptive statistics results.

Standard
Variable Obs. Mean Min. Max.
Deviation
lnPatents 672 1.435 1.694 0.000 5.645
GovSub 672 0.017 0.033 0.000 0.263
RDI 672 0.691 1.535 0.000 12.873
Debt 672 2.426 1.877 0.643 17.958
lnAssets 672 21.963 1.097 19.435 25.350
OIGR 672 0.389 3.153 −0.777 55.759
TQ 672 1.457 1.328 0.077 13.491
lnAGE 672 2.568 0.634 0.000 3.611
ROA 672 0.017 0.079 −0.754 0.298
ER 672 1.603 3.414 −31.738 39.358
RDP 672 4.579 2.161 0.000 8.956
Source: Produced by the authors from the sample data using Stata 16.1.

Based on these findings, we saw there was a need to thoroughly explore whether R&D
investment and government subsidies stimulated or guided the technological progress of
Chinese PV enterprises during the study period.

4.2. Correlation Analysis

It can be seen from Table 3 that the dependent variable technological progress (lnPatents),
the independent variable R&D investment (RDI), and the direct/moderating variable
government subsidy (GovSub) are all significantly positively correlated at the 1% level, and
there is an association between the three. There is also a positive correlation between R&D
investment and government subsidies, which is significant at the 1% level. At the same
time, the independent variable and control variables are significantly positively correlated,
with the exception of the debt-to-asset ratio (debt), return on total assets ratio (ROA), and
equity ratio (ER), which are not significant.
Energies 2022, 15, 4462 12 of 26

Table 3. Pearson’s correlation coefficient.

lnPatents GovSub RDS Debt lnAssets OIGR TQ lnAGE ROA ER RDP

lnPatents 1
GovSub 0.107 *** 1
RDI 0.532 *** 0.225 *** 1
Debt −0.047 0.071 * 0.086 ** 1
lnAssets 0.530 *** −0.053 0.309 *** −0.319 *** 1
OIGR 0.081 ** 0.012 0.019 −0.053 0.095 ** 1
TQ −0.204 *** 0.183 *** −0.025 0.412 *** −0.521 *** −0.026 1
lnAGE 0.322 *** −0.058 0.322 *** −0.165 *** 0.513 *** 0.038 −0.244 *** 1
ROA 0.037 0.065 * −0.031 0.173 *** 0.094 ** 0.036 0.129 *** −0.050 1
ER −0.012 −0.062 −0.057 −0.201 *** 0.106 *** 0.048 −0.083 ** 0.058 −0.066 * 1
RDP 0.422 *** −0.027 0.240 *** −0.209 *** 0.363 *** 0.032 −0.263 *** 0.223 *** −0.054 −0.004 1
Note: ***, **, and * indicate significance at the levels of 1%, 5%, and 10%, respectively. Source: Produced by the
authors from the sample data using Stata 16.1.

4.3. Benchmark Regression Analysis

Before estimating the regression model, we conducted multicollinearity tests on all
explanatory variables. The results showed that the variance inflation factor (VIF) value
among all variables was much lower than 10, indicating that there was no problem with
multicollinearity. In this paper, the Hausman test was performed before regression, and a
panel fixed-effect regression model was selected to estimate the parameters. Table 4 reports
the regression results of Models 1–3.

Table 4. Regression analysis results for the effects of R&D investment and government subsidies on
technological progress.

Model 1 Model 2 Model 3

RDI 0.757 *** 1.193 ***
(0.22) (0.29)
RDI2 −0.134 ** −0.299 ***
(0.05) (0.09)
RDI3 0.007 * 0.021 ***
(0.00) (0.01)
GovSub 4.546 ** 4.764 *
(2.03) (2.58)
GovSub × RDI −9.316 **
(4.15)
GovSub × RDI2 2.848 **
(1.17)
GovSub × RDI3 −0.200 **
(0.08)
RDP 0.062 ** 0.074 ** 0.057 **
(0.02) (0.03) (0.03)
Debt 0.021 0.033 0.019
(0.03) (0.04) (0.03)
lnAssets 0.618 *** 0.690 *** 0.602 ***
(0.18) (0.19) (0.16)
OIGR 0.012 0.013 0.012
(0.01) (0.01) (0.01)
TQ 0.102 ** 0.101 0.077
(0.05) (0.06) (0.05)
lnAGE −0.163 −0.135 −0.138
Energies 2022, 15, 4462 13 of 26

Table 4. Cont.

Model 1 Model 2 Model 3

(0.43) (0.53) (0.42)
ROA −0.086 −0.574 −0.212
(0.55) (0.48) (0.53)
ER −0.017 ** −0.020 *** −0.015 **
(0.01) (0.01) (0.01)
_cons −12.781 *** −14.518 *** −12.594 ***
(3.93) (4.35) (3.57)
Year control control control
Firm control control control
R2 0.524 0.483 0.541
Adj. R2 0.501 0.459 0.515
N 672 672 672
Note: ***, **, and * indicate significance at the levels of 1%, 5%, and 10%, respectively. _cons is constant, R2 is the
coefficient of determination, Adj. R2 is the adjusted R2 , and N is the number of samples. Source: Produced by the
authors from the sample data using Stata 16.1.

4.3.1. Direct Effect of R&D Investment

As can be observed from Model 1 in Table 4, the respective estimated coefficients for
enterprise R&D investment (RDI), R&D investment squared (RDI2 ), and R&D investment
cubed (RDI3 ) are 0.757, −0.134, and 0.007, which are significant at 1%, 5%, and 10% levels,
respectively, indicating that there may be an N-shaped non-linear nexus between R&D
investment and technological progress and thereby validating the rationale of Hypothesis 1.
In Model 3, the respective estimated coefficients for RDI, RDI2 , and RDI3 are 1.193, −0.299,
and 0.021, respectively, which are significant at the 1% level. This still indicates that there
is an N-shaped nexus between R&D investment and technological progress, verifying
Hypothesis 1 once again.
Technological progress and low production costs are two major driving forces that
profoundly change the development paradigm of China’s PV industry. According to the
findings of this research, a non-linear N-shaped curve represents the nexus between PV
enterprises’ R&D investment and technological progress. Therefore, it has been necessary to
increase R&D investment in the early development stage of China’s PV industry. The R&D
investment of Chinese PV enterprises, especially in the upstream crystalline silicon, silicon
wafer, and midstream module manufacturing links of the industrial chain, maintained
a growth trend from 1999 to 2019. With the increase in R&D investment, China’s PV
industry has been able to achieve innovative development. Crystal silicon and battery
products with different technical routes are emerging continuously, such as high-purity
polycrystalline silicon, monocrystalline passivated emitters and rear cells, and films. The
photoelectric conversion efficiency in China has reached more than 24%, representing the
world’s leading level.
However, it is not necessarily the case that the more money spent on R&D, the better.
The efficiency of R&D input and output is the key to improving the innovation of PV
enterprises. Penrose’s resource-based theory holds that enterprise efficiency is determined
not only by the investment in resources but also by the management of those resources [42].
PV enterprises that only focus on R&D investment and ignore R&D management will lack
innovation ability and only reap the effects of a “mountain of labor”. As such, Chinese
PV enterprises should pay attention to the R&D IQ concept proposed by Knott and focus
on R&D efficiency [20]. In addition, reducing costs is an important factor for Chinese PV
enterprises if they are to increase their market share by bettering the competition, which
they can achieve by increasing their production capacity and building large-scale industrial
development. Yet, many PV enterprises may “squeeze out” some of their R&D funds,
which may delay their technological progress. Moreover, when the R&D investment of
PV enterprises exceeds the inflection point, it will not bring the same degree of enterprise
technological innovation performance improvement. This conclusion is basically consistent
Energies 2022, 15, 4462 14 of 26

with the findings of [21,43]. Yet, all these studies indicate that, in the long run, increasing
R&D investment is still the fundamental driving force for improving enterprises’ innovation
capability and sustainable development.
To explain Hypothesis 1 further intuitively, we have drawn a fitting diagram of
R&D investment (RDI) and technological progress (lnPatents) free of the influence of
other variables, as shown in Figure 7. The line graph illustrates the changing trend of
technological progress at different levels of enterprise R&D investment without considering
other variables. As can be seen in Figure 7, the nexus between R&D investment and
technological progress is an N-shaped curve. Supporting this, the preliminary conclusion
drawn from the previous descriptive statistical analysis was that the R&D investment
and technological progress of PV enterprises may be very different. In fact, most PV
enterprises have a serious lack of R&D investment and have not taken the initiative to
make technological progress. Accordingly, most of the enterprises in the sample are located
at the left “promotion interval” of the first inflection point of the N-shaped curve, seeking
to promote their technological progress by increasing R&D investment. Meanwhile, only a
very small number of PV enterprises are at the right end of the second inflection point. So,
we consider that China’s PV industry is still in the climbing stage, and will remain there for
Energies 2022, 15, x FOR PEER REVIEW 15 of 28
a long time in the future. For now, Chinese PV enterprises must continue to increase R&D
investment to promote technological progress.

Figure 7. Influence of R&D investment on the technological progress of PV enterprises. Note: Enter-
Figure 7. Influence of R&D investment on the technological progress of PV enterprises. Note: En-
prise R&D investment and technological progress are dimensional parameters. Source: Produced by
terprise R&D investment and technological progress are dimensional parameters. Source: Produced
the authors from the sample data using SPSS 16.1.
by the authors from the sample data using SPSS 16.1.
4.3.2. Direct Positive Effect of Government Subsidies
4.3.2. Direct Positive Effect of Government Subsidies
As we can see from Model 2 in Table 4, the regression coefficient of government
As we(GovSub)
subsidies can see from Model
is 4.546, 2 in is
which Table 4, the regression
significant coefficient
at the 5% level. of government
In Model sub-
3, the regression
sidies (GovSub) is 4.546, which is significant at the 5% level. In Model 3, the regression
coefficient of GovSub is 4.764, which is significant at the 10% level. These results show that
coefficient of GovSub
the incentivizing effectis of
4.764, which issubsidies
government significant at the 10%
obtained by PVlevel. These results
enterprises show
is clear, thus
that the incentivizing
validating Hypothesiseffect 2. of government subsidies obtained by PV enterprises is clear,
thus validating Hypothesis 2.
First of all, from the perspective of the resource base, government subsidies can in-
fluence the innovation of enterprises through direct resource supplementation. Yet, tech-
nological progress is associated with positive externalities and high risks, which are par-
ticularly prominent for the PV industry, a new energy industry. To overcome market fail-
Energies 2022, 15, 4462 15 of 26

First of all, from the perspective of the resource base, government subsidies can
influence the innovation of enterprises through direct resource supplementation. Yet,
technological progress is associated with positive externalities and high risks, which are
particularly prominent for the PV industry, a new energy industry. To overcome market
failures and prevent enterprises from having high risks and low returns, the government
will share the risks with enterprises. Its own financial strength and adequacy of information,
shared with enterprises through various government subsidies, will mean the industry
achieves Pareto efficiency improvement. Plus, the government subsidies signal that the
industry is worthy of recognition, guiding external investors to provide greater external
financing to large PV enterprises, and ultimately, helping large enterprises to improve their
technological innovation. Given these mechanisms at work, many scholars accept that
government subsidies can promote technological progress.

4.3.3. Negative Moderating Effect of Government Subsidies

As can be observed from Model 3 in Table 4, the interaction coefficient of enterprise
R&D investment and government subsidies (GovSub × RDI) is −9.316, the interaction
coefficient of government subsidies and R&D investment squared (GovSub × RDI2 ) is
2.848, and the interaction coefficient of government subsidies and R&D investment cubed
(GovSub × RDI3 ) is −0.200, all of which are significant at the 5% level. This demonstrates
that government subsidies have a negative moderating effect on the relationship between
enterprise R&D investment and technological advancement, meaning Hypothesis 2 is
confirmed.
Although there have been controversies in academic circles about the role of govern-
ment subsidies in the development of strategic industries, judging from the actual effect of
China’s PV industry’s development, government subsidies have effectively promoted the
growth of the PV industry. However, our empirical results show that government subsidies
have not played an incentivizing and guiding role in industrial-technological innovation.
We believe this may be for the following reasons:
First, due to the high initial manufacturing cost of PV products, it is difficult for
enterprises to absorb the cost independently, and the creation of a terminal market is facing
a series of bottlenecks. The original intention of the government subsidy policies was
actually to cultivate this market, promote industry socialization, and reduce the operational
risks and production costs faced by enterprises, rather than directly stimulate enterprises’
R&D investment.
Second, since government subsidies are a “free lunch”, they have negative conse-
quences. Many loopholes have been exposed in the implementation of government sub-
sidies. Some PV enterprises take advantage of their information advantages to defraud
tax incentives and government subsidies through deliberate concealment and false dec-
larations, which seriously distort the final policy effect and reverse the stimulus effect of
government subsidy policies. In particular, the government subsidy policies for China’s PV
industry, especially the early “chaotic” subsidy policy, to some extent, induced many PV
enterprises to regard government subsidies as a “free lunch”, resulting in a huge waste of fi-
nancial resources and loss of control of industrial development, which created overcapacity
and excessive competition in the industry. As a result, the European and American devel-
oped countries initiated anti-dumping and anti-subsidy regulations against China, which
disrupted the structural adjustment and technological progress rhythm of the PV industry.
Third, government subsidies lead to immorality in the management of listed PV en-
terprises. To a certain extent, government subsidies can increase enterprises’ net profits
and improve their financial statements, but to a certain extent, this will lead to inertia.
Listed PV enterprises will come to rely on government subsidies to support their per-
formance, resulting in management laziness, excessive compensation, and lack of effort.
Enterprises will no longer pay attention to improving their core competitiveness and
making technological progress.
 Energies 2022, 15, 4462 16 of 26

To better demonstrate the moderating effect and further intuitively explain Hypothesis 3,
this paper followed the guidelines set out in [44] and plotted significant interactions after
grouping the sample by the government subsidy intensity (GovSub). Figure 8 shows three
geometric features: (1) The regression line of the low government subsidy group is above
that of the high group; (2) As the intensity of government subsidies increases, all inflection
points of the N-shaped curve move to the right (the R&D investment values corresponding
to the first and second inflection points of low government subsidies (less than one standard
deviation) are 3.08 and 5.03); (3) As the intensity of government subsidies increases, the
positive and negative slopes of the nexus between R&D investment and technological
progress become smaller, and the curve flattens. This shows that the sensitivity of techno-
logical progress to R&D investment will be weakened, and the impact of R&D investment
on technological progress will become less positive (more negative). This shows how the
role of R&D investment in promoting technological progress weakens. Figure 8 illustrates
the increasingly obvious inhibitory effect of government subsidy policies. We can see that
government subsidies are a “double-edged sword” when we combine their positive direct
effects. The figure further shows that government subsidy policies are not as widespread
Energies 2022, 15, x FOR PEER REVIEW 17 of 28
among enterprises as they should be, and it is vital to withdraw government subsidies in a
timely manner.

The
Figure8.8.The
Figure moderating
moderating effect
effect of of government
government subsidies.
subsidies. Note:
Note: Enterprise
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aredimensional
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ernment subsidies gradually strengthens, and timely withdrawal of government subsidies is crucial.
is crucial.
 Figure 9 demonstrates the marginal effect of government subsidies, showing
impact on technological progress at different levels of subsidy. It can be seen from F
9 that the marginal effect of government subsidies changes from positive to negativ
the overall performance is negative, showing a downward trend. Combined wi
above regression results, this further indicates that the negative moderating effect o
Energies 2022, 15, 4462 17 of 26
ernment subsidies gradually strengthens, and timely withdrawal of government sub
is crucial.

Figure 9. The marginal effect of government subsidies. Note: GovSub and the effects of lnPatents
Figure 9. The marginal effect of government subsidies. Note: GovSub and the effects of lnP
on linear pred. are
on dimensional parameters.
linear pred. are Source:
dimensional Produced
parameters. by theProduced
Source: authors from theauthors
by the samplefrom
data the samp
using Stata 16.1.using Stata 16.1.

The control variables can be seen from Model 3 in Table 4. The coefficient of the
enterprise R&D personnel (RDP) is positive and significant at the 5% level, indicating
Energies 2022, 15, x.that enterprises can promote technological progress by increasing their investment
https://doi.org/10.3390/xxxxx in
www.mdpi.com/journal/e
R&D personnel. R&D personnel are an important subject to promote the technological
progress of PV enterprises, and as such, are the core resources that all enterprises focus
on introducing and developing. The investment in R&D personnel will directly impact
technological progress. The coefficient of the enterprise scale (lnAssets) is positive and
significant at the 1% level, and this result is consistent with the fundamental realities of
China. In general, the larger the enterprise, the less restricted the funds, meaning the
enterprise can invest more funds in R&D for technological progress. Accordingly, larger
enterprises have an advantage in terms of technological progress.
The estimated coefficient of the enterprise age (lnAGE) is negative and not significant.
This may be particular to the PV industry, where mass government subsidies have caused
many enterprises to swarm to this emerging industry like “hungry wolves”. Yet, repeated
construction, disorderly implementation, and overcapacity, combined with the 2008 global
financial crisis and anti-dumping regulations from European and American countries,
have caused many PV enterprises to close down. Therefore, throughout the development
history of China’s PV industry, over the past 21 years, PV enterprises have entered and
exited frequently.
The debt-to-asset ratio (Debt) estimated coefficients are positive and not significant,
while the equity ratio (ER) estimated coefficients are negative and significant. The coefficient
of the operating income growth rate (OIGR) is positive, and the coefficient of the return
on total assets ratio (ROA) is negative, with neither significant. The coefficient of Tobin’s
Q (TQ) is positive but not significant. Since TQ value reflects the market potential of an
enterprise, a higher TQ value indicates better enterprise growth. The better the growth, the
more it can be recognized by investors, and the easier it then is for the enterprise to obtain
further innovative financing to promote technological innovation. The index regression
coefficient, meanwhile, is positive and consistent with common sense.

4.4. Robustness Test

(1) New measurement of technological progress
The authorization of invention patents, which are closely vetted by patent examiners,
can well reflect technological innovation capabilities. Yet, many studies have shown that
the numbers of invention patent applications and invention patent licenses do little to
reflect the innovation of an industry [45]. To this end, referring to Tan and Qian’s method
Energies 2022, 15, 4462 18 of 26

for measuring technological progress [46], this paper instead used the number of invention
patents granted and the natural logarithm as a new proxy variable. Accordingly, the results
of Model 1 in Table 5 are robust and support Hypotheses 2 and 3 once again.

Table 5. Robustness estimation results.

Model 1 Model 2 Model 3 Model 4

RDI 1.025 *** 0.770 *** 0.982 *** 2.004 ***
(0.24) (0.13) (0.29) (0.32)
RDI2 −0.237 *** −0.175 *** −0.275 *** −0.444 ***
(0.07) (0.04) (0.09) (0.10)
RDI3 0.016 *** 0.011 *** 0.020 *** 0.027 ***
(0.01) (0.00) (0.01) (0.01)
GovSub 4.227 * 4.659 *** 9.644 *** 5.936 **
(2.22) (1.79) (2.68) (2.63)
GovSub × RDI −8.503 *** −8.037 *** −12.206 ** −15.918 ***
(3.09) (2.99) (5.47) (4.66)
GovSub × RDI2 2.561 *** 1.959 ** 3.588 ** 4.277 ***
(0.85) (0.80) (1.52) (1.30)
GovSub × RDI3 −0.175 *** −0.118 ** −0.246 *** −0.271 ***
(0.05) (0.05) (0.09) (0.08)
RDP 0.025 −0.479 *** 0.136 *** 0.144 ***
(0.02) (0.08) (0.04) (0.04)
Debt −0.026 −0.505 *** 0.115 ** 0.028
(0.03) (0.12) (0.05) (0.04)
lnAssets 0.502 *** −1.093 *** 0.765 *** 0.564 ***
(0.13) (0.22) (0.13) (0.12)
OIGR 0.009 −0.017 0.018 0.018
(0.01) (0.05) (0.02) (0.01)
TQ 0.072* −0.104 0.009 0.085
(0.04) (0.16) (0.10) (0.07)
lnAGE 0.078 0.420 −0.585 −0.106
(0.33) (0.39) (0.39) (0.23)
ROA −0.102 1.655 −0.832 −0.000
(0.44) (1.92) (0.88) (0.63)
ER −0.005 0.006 −0.026 −0.011
(0.01) (0.03) (0.02) (0.01)
_cons −10.787 *** 25.690 *** −18.133 *** −11.968 ***
(2.84) (4.44) (2.98) (2.53)
Year control control control control
Firm control control control control
N 672 672 672 672
Note: ***, **, and * indicate significance at the levels of 1%, 5%, and 10%, respectively. Source: Produced by the
authors from the sample data using Stata 16.1.

(2) Zero-inflation Poisson regression

Considering the large number of “0” values in the sample, which may have emerged
due to sample selection deviation, this paper used the zero-inflated Poisson regression (ZIP)
method to estimate Model 3. The idea is similar to that of the two-stage model proposed
by Heckman [47]. In theory, the decision may be made in two stages. In the first stage,
the binary selection model is adopted, taking zero or a positive integer as the input. The
second stage entails precisely selecting which positive integer is to be used based on the
regression analysis. The results of our zero-inflation Poisson regression indicated that the
Poisson regression should be rejected and the zero-inflation Poisson regression selected.
The results of Model 2 in Table 5 are robust and support Hypotheses 1–3 once again.
(3) Tobit regression model
The Tobit model is mainly used in the regression analysis of continuous count data
containing a large number of “0” values. The Tobit model holds that for some data points in
Energies 2022, 15, 4462 19 of 26

the actual observation data, the explanatory variable is compressed at a point, meaning the
data have a mixed (point and a continuous) distribution. Given the left-tailed distribution
of the patent data, the Tobit model was used to estimate the need for a robustness test.
The results of Model 3 in Table 5 are robust and support the research hypothesis in the
previous paper.
(4) Propensity score matching (PSM)
PV enterprises receiving government subsidies went through a process of being
selected [48], so they may represent a “screening effect”. In studying this, government
subsidies were regarded as a dummy variable, indicating whether or not enterprises
received such subsidies. Enterprises receiving subsidies were 1, and those without were
0. The propensity score matching (PSM) method was used for robustness testing, and the
one-to-one nearest matching method was used for matching. The balance test results in
Table 5 show that the deviation of all paired variables did not exceed 10%, and a t-test
showed no significant difference between the treatment and control groups at the 10% level,
indicating that the sample matching effect was better.
This paper used matched samples to test the role of government subsidies in mod-
erating the nexus between enterprise R&D investment and technological progress. The
results of Model 4 in Table 5 show that the coefficients of the variables RDI, RDI2 , RDI3 ,
GovSub, GovSub × RDI, GovSub × RDI2 , and GovSub × RDI3 were significant at the 1%
level, which supports Hypotheses 1–3, while indicating that the results are robust.
To summarize, when we changed the measurement method for the dependent
variable—using Tan and Qian’s method for measuring technological progress [46], zero-
inflation Poisson regression, Tobit regression, and PSM regression—the four methods
applied gave the same results as the benchmark regression, which verified Hypotheses 1–3
proposed in this paper. The N-shaped relationship between R&D investment and techno-
logical progress is thus well-proven, meaning continuous R&D investment is a necessary
factor at this stage for the success of China’s PV industry. Meanwhile, government subsidies
are a “double-edged sword”, having a positive direct effect and negative moderating effect;
we propose that it is important to allocate government subsidies reasonably and implement
a timely retreat policy.

4.5. Further Analysis

4.5.1. Heterogeneity Analysis to Distinguish Different Stages of PV Industry Development
A significant year in the history of China’s PV industry was 2013. Before then, Chinese
enterprises had expanded into foreign markets, especially high-end foreign markets such
as the United States, Europe, and Japan. However, with the reduction of subsidies in
other major PV countries, the outbreak of the global financial crisis in 2008, and the severe
impact of the “dual reverse” policies of the European Union and United States, the market
abroad shrunk. At the same time, emerging markets such as the Middle East, China,
India, and Southeast Asia began to take off and become more important. At the end of
2012, the State Council of China issued the “Five National Measures” to increase efforts to
support the development of the PV industry in terms of industrial structure adjustment,
industrial development, application markets, support policies, and market mechanisms. In
August 2013, as a detailed supporting policy of the “Five National Measures”, the “Notice
on Utilizing a Price Leverage to Promote the Healthy Development of the PV Industry”
was officially issued, implementing three types of PV feed-in tariffs and a distributed PV
kilowatt-hour subsidy. As such, 2013 became an important watershed in the history of
China’s PV industry (Figure 6). Since then, entering the policy-driven period, the subsidy
policies have matured, hailing the “golden era” of China’s PV application market. Looking
closely at the timeline, how can we differentiate the effects of government subsidy policies
and R&D investment on technological progress pre- and post-2013?
The results of a staged regression are shown in Table 6. Model 1 represents the
regression results for the first stage (1999–2013), and the regression results for the second
stage (2014–2019) are shown in Model 2. The former shows that the regression coefficient
Energies 2022, 15, 4462 20 of 26

of RDI is 1.195, which is significant at the 1% level. The regression coefficient of RDI2 is
−0.353, which is significant at the 10% level. The RDI3 is not significant, indicating that
R&D investment had an inverted “U”-shaped nexus with technological progress. Model 2
shows that the regression coefficient of RDI is 1.204, which is significant at the 5% level,
the regression coefficient of RDI2 is −0.276, which is significant at the 10% level, and the
regression coefficient of RDI3 is 0.017, which is significant at the 10% level, indicating
that the nexus between R&D investment and technological progress in the second stage
becomes N-shaped. The coefficients of GovSub are 3.460 and 14.889 in the first and second
stages, respectively, both of which are significant at the 10% level, indicating that the
direct incentivizing effect of government subsidies became enhanced in the second stage.
In the first stage, GovSub × RDS is −12.277, and in the second stage, GovSub × RDS is
−21.296, both of which are significant at the 10% level, indicating that government subsidies
have a negative moderating effect on the nexus between enterprise R&D investment and
technological progress.

Table 6. Staged regression results.

Model 1 Model 2 Model 3

1999~2013 2014~2019 Full Sample
RDI 1.195 *** 1.204 ** 1.193 ***
(0.39) (0.51) (0.29)
RDI2 −0.353 * −0.276 * −0.299 ***
(0.19) (0.14) (0.09)
RDI3 0.022 0.017 * 0.021 ***
(0.02) (0.01) (0.01)
GovSub 3.460 * 14.889* 4.764 *
(2.00) (7.46) (2.58)
GovSub × RDI −12.277 * −21.296 * −9.316 **
(6.04) (11.51) (4.15)
GovSub × RDI2 4.237 5.135 2.848 **
(3.31) (3.21) (1.17)
GovSub × RDI3 −0.268 −0.298 −0.200 **
(0.46) (0.19) (0.08)
RDP 0.077 ** 0.045 0.057 **
(0.03) (0.06) (0.03)
Debt 0.064 0.018 0.019
(0.05) (0.08) (0.03)
lnAssets 0.628 *** 0.913 *** 0.602 ***
(0.18) (0.19) (0.16)
OIGR −0.009 0.010 * 0.012
(0.01) (0.00) (0.01)
TQ 0.068 0.074 0.077
(0.05) (0.19) (0.05)
lnAGE 0.097 −9.163 −0.138
(0.42) (7.00) (0.42)
ROA 0.030 0.188 −0.212
(0.50) (1.30) (0.53)
ER −0.012 −0.023 −0.015 **
(0.01) (0.02) (0.01)
_cons −13.550 *** 7.901 −12.594 ***
(3.93) (20.27) (3.57)
Year control control control
Firm control control control
R2 0.448 0.419 0.541
Adj. R2 0.413 0.351 0.515
N 480 192 672
Note: ***, **, and * indicate significance at the levels of 1%, 5%, and 10%, respectively. Source: Produced by the
authors from the sample data using Stata 16.1.
Energies 2022, 15, 4462 21 of 26

The above regression results show that, first, R&D investment pre-2013 had an inverted
“U”-shaped nexus with technological progress, while in 2014–2019 they had an N-shaped
nexus. The transformation of this nexus shows that R&D investment can continuously
stimulate the technological progress and development of the PV industry, suggesting
that China’s PV industry should continue to increase its R&D investment, to improve the
effectiveness of its technological progress. This strongly indicates that the reason China’s
PV industry has been able to rapidly grow so that the sector is now largely “Made in China”,
which has occurred in less than 20 years, is closely bound up with the early development
model of China’s PV industry, which focused on increasing R&D investment to achieve
technological progress [5]. Moreover, we believe that many scholars may have overlooked
the advantage of the low technological and talent entry points of China’s PV industry. The
early position of China’s PV industry value chain was in the midstream (mainly modules)
and partly in the upstream (mainly silicon wafers). The modules and silicon wafers are
actually semiconductors and diodes, making the PV module technology semiconductor
technology. The shape, size, purity, flatness, smoothness, and cleanliness of PV silicon
wafers are much lower than those of semiconductor silicon wafers. This has meant that the
thresholds of talent and technology for China’s PV industry have actually not been too high.
As such, enterprises in China have benefitted from building on basic integrated circuit
technology and low-skilled staff. In addition, in the early stages of industrial development,
China’s PV industry achieved remarkable progress by increasing R&D investment. Later, it
continued to achieve remarkable progress by continuously increasing its R&D investment.
In summary, we find that the “tail” of the inverted U-shape [49–51], extending to the
N-shape that appeared in the first to second stage, is the result of the Chinese PV industry’s
continuous increase in R&D investment and its long-term efforts.
The regression results also show that, second, with the significant increase in gov-
ernment subsidies (Figure 8), the positive direct effect of those began to strengthen in
the second stage [52]. This could be related to how after 2013, the Chinese government
upgraded its standards and strengthened its supervision of various subsidies to the PV
industry, plugging policy loopholes and better containing certain PV enterprises that had
cheated the government of its subsidies. In recent years, the PV industry has developed
rapidly, not only driven by market demand but also by the continuous R&D investment
of enterprises, closely related to the large-scale subsidies awarded by the government to
the PV industry [53]. We observe that the Chinese government may have taken a relatively
wise approach. Considering the huge risks and uncertainty around the development direc-
tion of the early PV industry, a tentative government subsidy was chosen, and subsidies
did not begin to increase rapidly until later (Figure 8). The salient features of China’s PV
industry in the second stage are the relative maturity of the industry, clear development
potential, and broad market prospects. We believe this is the result of the inclusive nature
of the Chinese government’s subsidy policies in the first stage, which aimed to encourage
PV enterprises to invest more of their profits in scientific R&D, expand reproduction and
other fields, enhance the viability of PV enterprises, and cultivate the scale of the market,
thereby “creating a more enabling environment”. In the second stage, the government
plugged loopholes in its subsidy policies by raising the technical threshold, enforcing
subsidy standards, improving the regulatory system and other measures, removing the
black sheep, and purifying the development environment of the PV industry. Looking
ahead, establishing a market-oriented support mechanism, with the help of market forces,
to encourage and prompt PV enterprises to invest greater resources in product R&D and
innovation will be necessary to avoid their excessive dependence on subsidy policies and
limit the efforts by certain enterprises to cheat these.

4.5.2. Heterogeneity Analysis to Distinguish Different Types of Government Subsidies

Table 7 reports the different government subsidy methods. Model 1 presents the
regression results for financial subsidies, while those for tax returns are shown in Model
2. In Model 1, the regression coefficient of RDI is 1.090, of RDI2 is −0.274, and of RDI3
Energies 2022, 15, 4462 22 of 26

is 0.021, which are significant at the 1%, 1%, and 5% levels, respectively. This shows that
R&D investment has an N-shaped nexus with enterprise technological progress, which
is consistent with Hypothesis 1 above. The regression coefficient of the financial subsidy
(GovSub) is 8.132, which is not significant. The interaction coefficient between financial
subsidies and R&D investment (GovSub × RDI) is 22.901, between financial subsidies and
R&D investment squared (GovSub × RDI2 ) is 8.482, and between financial subsidies and
R&D investment cubed (GovSub × RDI3 ) is −0.810, which are significant at the 5%, 1%,
and 5% levels, respectively. This shows that financial subsidies have a negative moderating
effect on the nexus between enterprise R&D investment and technological progress, which
is consistent with Hypothesis 3.

Table 7. Heterogeneity analysis of different government subsidy methods.

Model 1 Model 2 Model 3

Financial Subsidy Tax Return Full Sample
RDI 1.090 *** 0.733 ** 1.193 ***
(0.29) (0.30) (0.29)
RDI2 −0.274 *** −0.161 * −0.299 ***
(0.09) (0.09) (0.09)
RDI3 0.021 ** 0.012 * 0.021 ***
(0.01) (0.01) (0.01)
GovSub 8.132 4.379 * 4.764 *
(7.00) (2.33) (2.58)
GovSub × RDI −22.901 ** 23.347 −9.316 **
(8.51) (15.14) (4.15)
GovSub × RDI2 8.482 *** −6.159 2.848 **
(3.09) (4.50) (1.17)
GovSub × RDI3 −0.810 ** 0.302 −0.200 **
(0.32) (0.26) (0.08)
RDP 0.060 ** 0.060 ** 0.057 **
(0.02) (0.03) (0.03)
Debt 0.024 0.014 0.019
(0.03) (0.03) (0.03)
lnAssets 0.611 *** 0.607 *** 0.602 ***
(0.17) (0.17) (0.16)
OIGR 0.012 0.006 0.012
(0.01) (0.01) (0.01)
TQ 0.092 ** 0.097 * 0.077
(0.04) (0.05) (0.05)
lnAGE −0.159 −0.160 −0.138
(0.43) (0.41) (0.42)
ROA −0.124 −0.163 −0.212
(0.59) (0.49) (0.53)
ER −0.020 *** −0.015 ** −0.015 **
(0.01) (0.01) (0.01)
_cons −12.615 *** −12.693 *** −12.594 ***
(3.71) (3.75) (3.57)
Year control control control
Firm control control control
R2 0.534 0.543 0.541
Adj. R2 0.509 0.518 0.515
N 672 672 672
Note: ***, **, and * indicate significance at the levels of 1%, 5%, and 10%, respectively. Source: Produced by the
authors from the sample data using Stata 16.1.

In Model 2, the regression coefficient of RDI is 0.733, of RDI2 is −0.161, and of RDI3 is
0.021, which are significant at the 5%, 10%, and 10% levels, respectively. This shows that
there is an N-shaped nexus between R&D investment and enterprise technological progress,
which is consistent with Hypothesis 1. The regression coefficient of the tax return (GovSub)
Energies 2022, 15, 4462 23 of 26

is 4.379, which is significant at the 10% level. Meanwhile, the interaction term of R&D
investment and the tax return is insignificant, indicating that there is no moderating effect.
According to these results, we can conclude that financial subsidies have a nega-
tive moderating effect on the relationship between R&D investment and technological
progress for PV enterprises, while the tax return has a direct positive incentivizing effect on
technological progress.
When considering the different government subsidy methods. on the one hand, since
financial subsidies are a kind of “ante” subsidy, PV enterprises face certain threshold condi-
tions to apply for the financial subsidies, and the procedures are relatively cumbersome.
On the other hand, because of information asymmetry, it is easier for “adverse selection”,
“moral hazard”, “misalignment of incentives”, and other serious problems to occur. Some
PV enterprises defraud financial subsidies by deliberately concealing false declarations
and distorting the effect of financial subsidy policies [54]. For reasons such as these, the
financial subsidies had a negative moderating effect and did not produce direct positive
incentives. The tax return, meanwhile, is a type of “post” subsidy, as only when PV enter-
prises successfully innovate and convert their ideas into products can they benefit from a
tax return [55], which can significantly reduce the phenomena of fraud and profiteering.
As such, the tax return method has greater advantages in eliminating external negative
effects and avoiding efficiency losses.

5. Research Conclusions and Policy Recommendations

This paper investigated panel data for listed Chinese enterprises in the PV indus-
try to empirically test the nexus between government subsidies, R&D investment, and
technological progress. The results suggest the following:
First of all, there is a significant “N”-shaped non-linear nexus between R&D investment
and the technological progress of PV enterprises (Figure 7), and most PV enterprises are
in the “promotion interval” on the left of the first inflection point of the N-shaped curve,
indicating that Chinese PV enterprises still need to increase their R&D investment to
promote technological progress. Second, the regression coefficient of GovSub in Model 3 in
Table 4 is 4.764, which is significant at the 1% level. This shows that government subsidies
for PV enterprises have a direct positive promoting effect on technological progress by
alleviating the innovation financing constraints of PV enterprises and thus introducing
an “innovation smoothing effect”. Third, as can be observed from Model 3 in Table 4,
the interaction coefficient of GovSub × RDI is −9.316, of GovSub × RDI2 is 2.848, and
of GovSub × RDI3 is −0.200, all of which are significant at the 5% level. We can infer
from this that government subsidies have a significant negative moderating effect on
the nexus between R&D investment and technological progress (Figure 8), and with the
increase in government subsidies, this inhibitory effect becomes more obvious (Figure 9).
Fourth, Model 1 in Table 6 (1999–2013) shows that the regression coefficient of RDI is 1.195,
which is significant at the 1% level. The regression coefficient of RDI2 is −0.353, which is
significant at a 10% level. The RDI3 is not significant, indicating that R&D investment has
an inverted U-shaped nexus with technological progress. Model 2 in Table 6 (2014–2019)
then shows that the regression coefficient of RDI is 1.204, which is significant at the 5%
level, the regression coefficient of RDI2 is −0.276, which is significant at the 10% level, and
the regression coefficient of RDI3 is 0.017, which is significant at the 10% level, indicating
that the nexus between R&D investment and technological progress in the second stage
became an N-shaped nexus. From the first (1999–2013) to the second stage (2014–2019),
the curve of the nexus between R&D investment and technological progress for the PV
industry underwent a transformation from inverted U-shaped to N-shaped. This explains
why China’s PV industry has rapidly grown, making the sector largely “Made in China”.
Fifth, in Model 1 in Table 7, the interaction coefficient between financial subsidies and R&D
investment (GovSub × RDI) is 22.901, between financial subsidies and R&D investment
squared (GovSub × RDI2 ) is 8.482, and between financial subsidies and R&D investment
cubed (GovSub × RDI3 ) is −0.810, which are significant at the 5%, 1%, and 5% levels,
Energies 2022, 15, 4462 24 of 26

respectively. In Model 2 in Table 7, the regression coefficient of the tax return (GovSub)
is 4.379, which is significant at the 10% level. Financial subsidies thus have a negative
moderating effect on the nexus between R&D investment and technological progress for
PV enterprises, but the tax return has a positive promoting effect, showing the superiority
of the tax return as a “post” subsidy method.
The research results in this paper have major implications for policymakers and related
enterprises: First of all, although R&D investment has an N-shaped nexus with technologi-
cal progress (Figure 7), the time from start-up to achieving leapfrog development can be
as short as a decade or as long as several decades. Regardless of how long it lasts, in the
climbing stage (before the N-shaped curve inflection point) (Figure 7), enterprises must
make full use of their existing advantages, i.e., building from a low technological and
talent entry point and adhering to the development mode of increasing R&D investment
to achieve industrial-technological progress. The essentiality of doing so is an important
contribution of this paper. Second, this research project did not find a positive moderating
effect of government subsidies but instead found a negative moderating effect (Figure 8).
The Chinese government introduced small-scale inclusive government subsidies in the
early stages to support the development of the PV industry, which had the effect of “cre-
ating a more enabling environment”. More recently, thorough intervention and strict
supervision have improved the environment of the PV industry, enabling its healthy and
sound development. Yet, though this played a positive role in promoting the development
of the PV industry, it alleviated the inhibitory effect of government subsidies on R&D
investment and technological progress. Third, it is crucial that PV enterprises come up with
an integrated plan for their self-management, to avoid the double dilemma of government
subsidy dependence and huge financial pressure from the government on PV enterprises.
From this perspective, the long-term strategy to develop this strategic industry should be
for the government to implement a timely financial subsidy reduction policy, fully opening
up Chinese PV enterprises to global market competition.
In closing, we must note that the limitations of this study are twofold. First, this
paper only used listed Chinese A-share enterprises as the sample and did not consider
other non-listed enterprises. Accordingly, subsequent research should seek to broaden the
sample and expand its size. Second, the influencing mechanism of technological progress
in the PV industry is complicated, and there are limitations to how we can study it using
traditional regression analysis. Future research should consider applying methods based
on machine learning to take greater variables into account and thereby reveal the complex
mechanism affecting technological progress in the PV industry.

Author Contributions: Data curation, J.L., H.Z. and P.C.; methodology, J.L., H.Z., P.C. and X.H.;
software, J.L.; supervision, J.W.; validation, J.W.; visualization, X.C., J.W. and X.H.; writing—original
draft, J.L.; writing—review and editing, X.C. All authors have read and agreed to the published
version of the manuscript.
Funding: This work was supported by the National Natural Science Foundation of China (71463010
and 72164007), the Major Program of the National Fund of Philosophy and Social Science of
China (17ZDA046), and the Innovation Project of GUET Graduate Education (2021YCXS087 and
2020YCXS072).
Institutional Review Board Statement: Not applicable.
Informed Consent Statement: Not applicable.
Data Availability Statement: Not applicable.
Conflicts of Interest: The authors declare no conflict of interest.
Energies 2022, 15, 4462 25 of 26

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