The Effects of Government Support and Regulation on SMEs Technology Innovation

정부지원과 규제장벽이 국내 중소기업의 기술혁신성과에 미치는 영향에 관한 연구

  • Sohn, Dongseop (Dept. of Management of Technology, Sungkyunkwan University) ;
  • Lee, Jungsoo (Korea Institute of Robots and Convergence) ;
  • Kim, Yunbae (Dept. of Systems Management Engineering, Sungkyunkwan University)
  • 손동섭 (성균관대학교 기술경영학과) ;
  • 이정수 (한국로봇융합연구원) ;
  • 김윤배 (성균관대학교 시스템경영공학과)
  • Received : 2017.01.10
  • Accepted : 2017.04.20
  • Published : 2017.04.28


The purpose of this study is to investigate the actual effect of government R&D support and regulation as a policy on technology innovation of SMEs. Because the previous studies did not consider the endogeneity of R&D support and made inconsistent conclusions in the case of regulation, the empirical research was conducted by logistic, negative binomial regression and 2SLS analysis for 1,223 SMEs. The analysis results show that government support has the effect for technology innovation even considering the endogeneity of government R&D support, and government regulation has a positive effect on technology innovation which supports Porter's theory. These results imply that government R&D support is important in inducing technology innovation because of the vulnerability of SMEs technology development environment and government should foster SMEs technology innovation through appropriate regulation policies rather than unconditional deregulation.


Government support;Regulation;Technology innovation;SMEs;Two-stage least squares


  1. Schilling, M. A., "Strategic management of technological innovation(3rd ed.). McGraw-Hill Korea", 2010.
  2. Cho Ka Won, "Effects of Firm Characteristics on Qualification for Government R&D Supports." Journal of Technology Innovation, Vol. 18, No. 1, pp. 99-121, 2010.
  3. Nicoletti, G. and Scarpetta, S., "Regulation, Productivity and Growth: OECD Evidence." Economic Policy, Vol. 18, No. 36, pp. 9-72, 2003.
  4. Jo Ju Hyeon, "Focusing on Korean Manufacturing Industries = Environmental Regulation Implementation and Innovation." Kyong Je Hak Yon Gu, Vol. 51, No. 4, pp. 279-313, 2003.
  5. Jo Ju Hyeon, Lee Yeong Su, Cha Geun Ho, "Focusing on indirect and direct productivity effects = Environmental Regulation Implementation and Productivity Analysis." The Korean Journal of Industrial Organization, Vol. 12, No. 1, pp. 21-62, 2004.
  6. Palmer, K., Oates, W. E. and Portney, P. R., "Tightening Environmental Standards: The benefit cost or no-cost paradigm." Journal of Economic Perspectives, Vol. 9, No. 4, pp. 119-132, 1995.
  7. Jaffe, A. B. and Palmer, K., "Environmental Regulation and Innovation: A panel data study." Review of Economics and Statistics, Vol. 79, No. 4, pp. 610-619, 1997.
  8. Lee Mi-Hong, "A Study on the Relationship between Industrial Environmental Innovation and Environmental Policy." Korean Public Administration Review, Vol. 37, No. 1, pp. 293-313, 2003.
  9. Ministry of Science, ICT and Future Planning, Korea Industrial Technology Association, "Technological Innovation Support System for Creative Economy. Seoul: Jin Han M&B", 2014.
  10. Hyuck Jun Song, Yi Bae Kim, Oung Rak O, "The Study on the Effect of SBC Policy Funding Programs on the Improvement of Financial Performance." The Korean Small Business Review, Vol. 28, No. 4, pp. 65-80, 2006.
  11. Institute for Advanced Engineering, "Performance Analysis of SMEs Technology Innovation Development Project. The Small and Medium Business Administration", 2004.
  12. Lach, S., "Do R&D Subsidies Stimulate or Displace Private R&D: Evidence from Israel." The Journal of Industrial Economics, Vol. 50, No. 4, pp. 369-390, 2002.
  13. Grossmann, V., "How to Promote R&D-based Growth? Public Education Expenditure on Scientists and Engineers versus R&D Subsidies." Journal of Macroeconomics, Vol. 29, No. 4, pp. 1-21, 2007.
  14. Rothwell, R. and Dodgson, M., "Innovation and Size of Firm." The handbook of industrial innovation, pp. 310-324, 1994.
  15. Pavitt, K., "Sectoral patterns of technical change: towards a taxonomy and a theory." Research policy, Vol. 13, No. 6, pp. 343-373, 1984.
  16. Kim Yong Hwan, Lim Hee-Jung, "A Study on Policies and Strategy of Technological Innovation in Korea." Journal of the Korean Academic Society of Industrial Cluster, Vol. 1, No. 1, pp. 47-66, 2007.
  17. Lee Si-Kyung, "Issue and Criteria of Policy Instrument Choice in Environmental Regulation." Korean Public Administration Review, Vol. 30, No. 1, pp.113-127, 1996.
  18. OECD, "The OECD Regulatory Indicators Questionnaire: Regulatory Structures and Policies in OECD Countries." ECO/CPE/WPI 2003-11, 2003.
  19. Choi Byung Sun, "Theory of government regulation. Seoul: Bobmunsa", 2006.
  20. Young B. Lee, Hyun Jung Ji, "A Comparative Study of the Relationship between Government Regulation and Productivity in OECD Countries." Korean Journal of Public Administration, Vol. 46, No. 3, pp. 235-261, 2008.
  21. Kwak Soo Hwan, Choi Suk Bong, "Determinants of innovation in service industry: Resource based and industrial organization perspectives." Journal of the Korea Service Management Society, Vol. 10, No. 2, pp. 1-25, 2009.
  22. Suk-Bong Choi, Gui-Ryong Ha, "A Study of Critical Factors for Technological Innovation of Korean Manufacturing Firms." Journal of Industrial Economics and Business, Vol. 24, No. 1, pp. 1-24, 2011.
  23. Park Sang-Mun, Lee Byeong-Heon, "The Effects of the Utilization of External Resources on the Technological Innovations of New Ventures." The Korean Small Business Review, Vol. 28, No. 2, pp. 181-206, 2006.
  24. Changjuck Suh, Chanhyoung Lee, "An Analysis on the Moderated Effects of National R&D program on Technological Innovation in the SMEs." Journal of the Korean Production and Operations Management Society, Vol. 18, No. 3, pp. 23-52, 2007.
  25. Minjung Kim, Myungjae Moon, Yongsuk Jang, "A Study on the Impact of Policy Measures on Firms Technology Innovation: Focused on tax expenditures and subsidies." The Korea Association for Policy Studies, Vol. 20, No. 4, pp. 1-26, 2011.
  26. Kyungil Khoe, "Demand on Government Sponsored Loan and Successful Case Study on ICT SMEs: Focused on 'ICT Government Sponsored Loan Project'", Journal of the Korea Convergence Society, Vol. 8. No. 1, pp. 213-220, 2017.
  27. Guellec, D. and Van Pottelsberghe de la Potterie, B., "Does Government Support Stimulate Private R&D?" OECD Economic Studies, No. 29, 1997-2, pp. 95-122, 1997.
  28. Almus, M. and Czarnitzki, D., "The Effects of Public R&D Subsidies on Firms Innovation Activities: the Case of Eastern Germany." Journal of Business & Economic Statistics, Vol. 21, No. 2, pp. 226-236, 2003.
  29. Czarnitzki, D., Ebersberger, B. and Fier, A., "The Relationship between R&D Collaboration, Subsidies and R&D Performance: Empirical Evidence from Finland and Germany." Journal of Applied Econometrics, Vol. 22, No. 7, pp. 1347-1366, 2007.
  30. Cheol Ju Lee, Kang Taek Lee, June Seuk Shin, "Factors influencing commercialization of government SME R&D project: effect of patent and certification." Journal of Technology Innovation, Vol. 20, No. 3, pp. 230-254, 2012.
  31. Yoon Gyu Yoon, Young Woo Koh, "The Effects of Government-sponsored R&D on the Participating Firms' Performance." Journal of Technology Innovation, Vol. 19, No. 1, pp. 29-53, 2011.
  32. Lichtenberg, F. R., "The Effect of Government Funding on Private Industrial Research and Development: A Re-assessment." The Journal of Industrial Economics, Vol. 36, No. 1, pp. 97-104, 1987.
  33. Shrieves, R. E., "Market Structure and Innovation: A New Perspective." The Journal of Industrial Economics, Vol. 26, No. 4, pp. 329-347, 1978.
  34. Smith, G. V. and Parr, R. L., "Valuation of Intellectual Property and Intangible Assets(Vol. 13), New York: John Wiley & Sons", 2000.
  35. Pavitt, K., "Patent Statistics as Indicators of Innovative Activities: Possibilities and Problems." Scientometrics, Vol. 7, pp. 77-99, 1985.
  36. Griliches, Z., "Patent Statistics as Economic Indicators: A Survey." Journal of Economic Literature, Vol. 28, No. 4, pp. 1661-1707, 1990.
  37. OECD, "Oslo Manual: Guidelines for Collecting and Interpreting Innovation Data(3rd ed.)", 2005.
  38. Agresti, A., "Logit models for multinomial responses. Categorical Data Analysis", Second Edition, pp. 267-313, 2002.
  39. Ver Hoef, J. M., Boveng, P. L., "Quasi‐poisson Vs. Negative Binomial Regression: How Should We Model Overdispersed Count Data?", Ecology, Vol. 88, No.11, pp.2766-2772, 2007
  40. Young Sung Lee, "Metro Cities' and Provinces' Total Factor Productivity and its Determinants in Korea", The Korea Spatial Planning Review, Vol.58, pp.39-53, 2008.
  41. Gujarati, D. N., "Basic econometrics", Tata McGraw-Hill Education, 2009.

Cited by

  1. A Study on the Influencing Factors on the Economic Performances of the Waste-to-Energy Companies in Korea: Focusing on the Mediating Effects of the Government Policies vol.40, pp.3, 2018,