Purpose This paper seeks to show that capital subsidies are used as instruments of longterm corporate strategy. Previous research indicates that capital subsidies do not improve firm performance, as this is reflected by measures of productivity growth or by financial measures of profitability and improved capital structure.Designmethodologyapproach The paper shows that a large, publicly available database of firms in the Greek food and beverages, covering a significant time span, is used to evaluate the effects of capital subsidies on strategic performance. Strategic performance is reflected by three novel indicators capturing a firm's orientation towards market power and leadership.Findings The paper finds that capital subsidies have a positive impact on firms' longterm strategic orientations such as the firms' net market growth and the optimal scale of operation. The provision of capital subsidies assists firms to overcome the cost disadvantages coming from operation at a suboptimal scale of output and fixed capital, and increase their net market share.Research limitationsimplications The paper shows that more measures of longterm strategic corporate performance should be employed in order to provide more research evidence that is required to detail the exact impacts of capital subsidies on corporate strategy.Practical implications The paper shows that the capital subsidies have an impact on strategic performance and thus their provision should be the outcome of careful design from the point of view of both the individual manager and the policy authorities.Originalityvalue In this paper three new indicators of a firm's strategic orientation are employed and provide the first empirical evidence of the impacts of capital subsidies on corporate strategy.
International Journal of Productivity and Performance Management – Emerald Publishing
Published: Oct 1, 2006
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