Transformations  in
Business & Economics

HOW INNOVATION AND ENTREPRENEURSHIP AFFECT ECONOMIC GROWTH? GOVERNMENT SUPPORT AND FINANCIAL DEVELOPMENT AS MODERATORS¹¹
Mingming Ren, Haijiang Wu

ABSTRACT: The innovation and entrepreneurship index is an important part of the structural reform of the world economy and represents a concrete manifestation of how to shape new dynamics of economic growth. However, there are still limitations in the theoretical explanations of existing studies on how innovation and entrepreneurship affect regional economic growth. To clarify the relationship between innovation and entrepreneurship and regional economic development, according to Schumpeter’s innovation theory and neoclassical economic growth theory, and using the panel data of each prefecture-level city in China from 2004 to 2019, the effects of innovation and entrepreneurship on regional economic growth and their boundary conditions were analyzed. Results show that (1) innovation and entrepreneurship have a significant positive impact on economic growth, which is conducive to promoting the high-quality development of China’s economy; (2) government support and the level of financial development have a positive moderating effect on the relationship between innovation and entrepreneurship and regional economic growth, and they enhance the effect of economic growth brought about by innovation and entrepreneurship; (3) innovation and entrepreneurship in the eastern and central regions of China significantly contribute to economic growth. The higher the administrative level is, the more significant the economic effect of innovation and entrepreneurship. The conclusions provide empirical data for the policy formulation and optimization of innovation and entrepreneurship and offer policy insights for regional economic development.

KEYWORDS:  innovation and entrepreneurship, economic growth, government support, financial development, regional heterogeneity

JEL classification:  A22, L26, I25, C02.

¹¹Acknowledgments:  This study was supported by the Funds of 2020 Program of Zhejiang Education Department (Grant No. Y202044654) and Major Humanities and Social Sciences Research ProjectsinZhejiang higher education institutions (Grant No. 2023QN121).