The cross-border spillover effect of U.S. government subsidies on firms' innovation: Evidence from the Sino-US supply chain

This study systematically assessed the cross-border spillover effects of U.S. government subsidies on the Sino-US supply chain using a multi-period difference-in-differences approach. Our findings indicate that the U.S. government's subsidy policies had an overall positive effect on the innovation of related Chinese firms throughout the supply chain. However, these policies had a significant negative impact on the innovation performance of Chinese suppliers to U.S. subsidized firms, while positively affecting the innovation performance of Chinese customers and competitors. Additionally, we found that the U.S. government's subsidy policy has facilitated the reestablishment of the U.S. industrial chain, indirectly promoting the development of production advantages for downstream firms in China. This has compelled the Chinese government to increase subsidies for related competitive industries as well.