170 The Impact of the Act for the Development of Biotech and New Pharmaceuticals Industry on Firm Innovation in Taiwan tech firms, the approved biopharmaceutical firms are more encouraged to invest in R&D activities and to improve their adjusted patent citations.29 These findings show the policy effectiveness of the Biopharmaceutical Act is only for biopharmaceutical firms (rather than firms in other high R&D intensity industries) on innovation improvement. 4.4.3 Subsample Analysis of Inter-industry The subsection considers two inter-industry subsample analyses. First, we consider the possible effect of firm size and divide the sample into small and large firms for the subsample analysis of inter-industry because the firm sizes of biopharmaceutical firms are smaller than those of high-tech industries in Table 1. In addition, small firms usually lack collaterals and are hard to obtain external financing for R&D (David et al., 2000; Hall, 2002). Further, small firms also find it more difficult to appropriate the returns from R&D and thus have less motivation to invest in R&D (Chen et al., 2013). Therefore, small firms are more likely to have serious R&D underinvestment problems. Table 9 shows the subsample DID regression result of inter-industry. Panels A.1 and A.2 of Table 9 exhibit significantly positive coefficients for the interaction term, After×Treatment, showing that for firms of similar sizes, approved biopharmaceutical firms have significantly higher R&D investment after the Biopharmaceutical Act than high-tech firms. However, the coefficients of the interaction term in the small firms are larger than those of large firms. These findings show that in the inter-industry analysis, the effect of the Biopharmaceutical Act on innovation investment may be stronger for small firms than for large ones. Small firms with more serious underinvestment problems may be stimulated to increase R&D investment after the Biopharmaceutical Act because the tax credits help to alleviate the financing constraint problem in small firms. These results are consistent with the concept of Baghana and Mohnen (2009) and Lokshin and Mohnen (2012), who argue that tax credit policy tends to be more effective in stimulating R&D input for small firms than for large firms. 29 The stimulation of innovation quality in the inter-industry comparison is less significant than the innovation investment.
RkJQdWJsaXNoZXIy ODg3MDU=