Can a fast expanding market sustain with supply-side government aid? An investigation into the Chinese solar photovoltaics industry

Wang, Pengji, Yuan, Lin, and Kuah, Adrian T.H. (2017) Can a fast expanding market sustain with supply-side government aid? An investigation into the Chinese solar photovoltaics industry. Thunderbird International Business Review, 59 (1). pp. 103-114.

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Abstract

The Solar photovoltaics (PV) industry is a policy-driven business, where political decisions considerably influence potential market take-off or decline. This is particularly true for China. From 2006 to 2010, the annual growth rate of the solar panel output approaches or exceeds 100%, with financial aid from the government to the suppliers. Despite the prevalence of supply-side aid, its actual impact on this fast expanding market development is debatable. We focus on 75 Solar PV companies from year 2005 to 2012 to obtain 249 observations, and investigate how government aid received in the form of bank loans and direct subsidies influences their performance. Our empirical results suggest that supply-side government aid does help improve scale efficiency to a limited extent, but can barely help with the technology efficiency. In the long run, we find supply-side aid leads to diseconomies of scale and hence, low efficiency and profitability.

Item ID: 40453
Item Type: Article (Research - C1)
ISSN: 1520-6874
Keywords: solar PV industry; China; supply-side government policy; efficiency; fast expanding market
Date Deposited: 21 Sep 2015 01:09
FoR Codes: 14 ECONOMICS > 1402 Applied Economics > 140202 Economic Development and Growth @ 50%
15 COMMERCE, MANAGEMENT, TOURISM AND SERVICES > 1503 Business and Management > 150308 International Business @ 50%
SEO Codes: 91 ECONOMIC FRAMEWORK > 9104 Management and Productivity > 910402 Management @ 30%
91 ECONOMIC FRAMEWORK > 9101 Macroeconomics > 910105 Fiscal Policy @ 20%
91 ECONOMIC FRAMEWORK > 9101 Macroeconomics > 910103 Economic Growth @ 50%
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