In this paper, the panel data of China from 2003 to 2012 and stochastic frontier and threshold regression models were used to analyze the impact of government’s fund and enterprises’ research and development (R&D) investment on China’s innovation efficiency and the optimal intensity of different R&D investment and their interval analysis. This research indicates that in the process of innovation in China, the impact of government R&D funding on innovation efficiency is negative, called "government failure"; enterprises’ R&D investment can promote innovation efficiency, meaning "market failure" phenomenon will be less. The optimal interval of investment intensity is 0.288 or above and the optimal interval of R&D investing intensity coefficient is between 0.688 and 0.775.
Key words: Government R&D fund, enterprise R&D investment, innovation efficiency.
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