Abstract: The literature on technological innovation provides no consensus on the motivation vs. crowding-out effect of government subsidies. This study proposes a contingency perspective on the basis of the resource-based view and principal-agency theory, suggesting that whether government subsidies facilitate technological innovation is dependent upon two principal-agent relationships: the conflict of interests between managers and owners and the conflict of interests between majority shareholders and minority shareholders. By analyzing firms from the electronics, pharmaceutical and information technology between 2008 and 2011, this study finds out that: first, there is no significant and positive relationship between government subsidies and technological innovations; second, CEO duality and the separation of ownership and control rights negatively moderate the relationship between government subsidies and technological innovations. These findings provide important guidance for governmental policies and corporate governance.

Key words: government subsidies, separation of ownership and control, technological innovation