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IMPACT OF GOVERNMENT INCENTIVES ON THE INNOVATION OUTPUT OF HIGH-TECH ENTERPRISES FROM THE PERSPECTIVE OF THE FREE TRADE ZONE: A CASE STUDY OF CHINA
Qi Dong, Aimin Wang, Keke He, Kevin Zhu

ABSTRACT. As an important area for China's reform and opening-up pilot work, the pilot free trade zone (FTZ) provides experience in system innovation for industrial and regional developments in several ways. The government is striving to effectively encourage enterprises to increase innovation output under the background of institutional innovation in the FTZ, with a combination of multiple incentive methods. However, for various micro-levels, the effect of government incentives must be different. To explore the mechanism of government subsidies and tax incentives on the innovation output of high-tech enterprises in the pilot cities of China's FTZ, using the data of A-share listed companies from 2013-2018 in China, the impact of government subsidies and tax incentives on the innovation output of high-tech enterprises after the FTZ establishment in China and the difference of effects in the process of influence were analyzed. Results show that government subsidies and tax incentives have a positive incentive effect on the innovative output of high-tech enterprises in FTZ. For the innovation output at various stages, the effects of research and development (R&D) subsidies, patents and intellectual property subsidies, achievement transformation subsidies, and tax incentives are different. For the output of enterprises at the R&D stage, R&D subsidies and tax incentives are effective. For the enterprise patent output subsidies, patent and intellectual property subsidies are effective. For the transformation of enterprise achievements, achievement transformation subsidies are effective. In high-tech industries with different innovation levels, the two types of government incentives have a heterogenicity influence on the innovation output of high-tech enterprises, that is, in an industrial environment with a high level of innovation, government subsidies and tax incentives have a promoting effect; whereas in an industrial environment with a low level of innovation, the effects are not obvious. The conclusions obtained from this study provide micro-level empirical evidence for the impact of government incentives on the innovation output of high-tech enterprises.

KEYWORDS:  Free Trade Zone, high-tech enterprises, government subsidies, tax incentives, innovative output.

JEL classification:  O11, O32, M19, L88, E62.