Transformations  in
Business & Economics

THRESHOLD EFFECT OF GOVERNMENT SUPPORT ON ENTERPRISE INNOVATION PERFORMANCE AND ITS REGIONAL DIFFERENCES⁷
Yongbo Yu, Ziwei Zhou, Jiahui Jia

ABSTRACT: In recent years, China’s government has been increasing the strength and scope of support for enterprise innovation. However, the overall innovation output remains insufficient, the gap in the innovation performance of different regions is growing, and the inefficiency of government support is increasing. To explore the effect of government support on enterprise innovation performance, using the panel data of China’s A-share listed companies from 2015 to 2018 and the panel threshold model, the threshold effects of government subsidies and tax incentives on enterprise innovation performance by grouping according to regional heterogeneity, and the regional differences of threshold effects of different government support modes were compared. Results show that innovation input has a significant mediating effect on the relationship between different government support and enterprise innovation performance. Among these effects, innovation input exerts a complete mediation for tax incentives. On the whole, the two methods of government support both have nonlinear effects on enterprise innovation performance through the mediating effect of innovation input. Government subsidies have a significant double threshold effect; the first and second thresholds have no significant impact, but the other stages promote outcomes. However, tax incentives have significant single and double-threshold effect and persistent positive effect on enterprise innovation performance. Clear variations in threshold effects are found between different regions, and the single threshold effect of government subsidies only occurs in the eastern regions with highly reduced promotion. Tax incentives are more effective in the central and western regions, where a single threshold effect changes from promotion to no significant impact. This study expands the research perspective and method of the relationship between government support and enterprise innovation performance. The conclusion is more in-depth and comprehensive, which helps government departments make scientific decisions on support methods and strengths in different regions.

KEYWORDS:  government support, innovation performance, mediating effect, panel threshold model.

JEL classification:  G38, P25, C23.

⁷Acknowledgments:  This study was supported by Humanities and Social Sciences Fund Projects of Ministry of Education of China (No. 21YJA630109).