Impacts of subsidy reallocation policy on the innovative performance: Empirical evidence from photovoltaic industry in China.

• This paper proves the subsidy reallocation policy promotes innovation of Chinese photovoltaic firms. • This paper employs the difference-in-difference model. • The heterogeneity of photovoltaic industrial links, development stages, ownership attributes and credit environments is investigated. Given the fervent debates on the effect of subsidies around the world, this paper examines the relationship between the subsidy reallocation policy and innovative performance of the photovoltaic industry in China. We take the setting as China has announced its climate goal to peak carbon emissions before 2030 and reach carbon neutrality before 2060, which dramatically changes its subsidy policies as to the new energy industry by reallocating financial supports to the industry. By employing a difference-in-difference model, we find that reallocation of government grants improves the innovative performance. Then, we explore the detailed mechanism by which government subsidies may affect innovative performance of the photovoltaic industry and investigates the heterogeneity of industrial links, development stages, ownership attributes and credit environments of the photovoltaic industry. [ABSTRACT FROM AUTHOR]