Small Business Economics

, Volume 52, Issue 1, pp 241–259 | Cite as

The certification effect of government R&D subsidies on innovative entrepreneurial firms’ access to bank finance: evidence from China

  • Li Li
  • Jean Chen
  • Hongli Gao
  • Li XieEmail author


In this paper, we argue that obtaining government R&D subsidies has a certification effect and is used by innovative entrepreneurial firms as a legitimation strategy to access bank finance. We extend the extant literature on the certification effect by combining legitimacy theory with information asymmetry to build our theoretical framework. We test our theoretical model under China’s unique institutional setting, in particular, the weak intellectual property rights (IPR) protection. Using 549 listed and 192 unlisted Chinese innovative entrepreneurial firms from 2009 to 2013, we find a positive certification effect on the acquisition of bank loans for all those sample firms. This positive effect is more profound in unlisted firms in our sample than the listed ones. We further find that regional variation of IPR protection has a moderating effect on the effectiveness of the certification. The certification effect is more significant in those regions where IPR protection is weaker.


Legitimacy Certification Financial constraints Innovative entrepreneurial firms Government R&D subsidies IPR protection China 

JEL classification

G28 O34 H25 L26 


Funding information

The National Natural Science Foundation of China; and the three funding numbers are: 71672087; 71533002; and 71132001.


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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Business SchoolNankai UniversityTianjinPeople’s Republic of China
  2. 2.International Business School SuzhouXian Jiaotong-Liverpool UniversitySuzhouPeople’s Republic of China

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