Impact of government funding for science and technology on regional innovation capability: An empirical study on a key economic and technological innovation zone in China

Innovation capability serves as a crucial driving force for regional economic growth. In this empirical study, we investigate if and how government funding for science and technology ( GFS ) can promote regional innovation capability ( RIC ), by taking Chengdu-Chongqing Economic Circle as an example. The Circle is a key economic zone in China, with a population of more than 98 million and GDP of more than 1.1 billion USD. Using the panel data of all 44 prefecture-level cities (districts and counties) in the zone from 2011 to 2020, a systematic research methodology, consisting of panel model, mediating effect model, and threshold effect model, is adopted in the analysis. The results demonstrate that GFS significantly promotes RIC , as confirmed by multiple robustness tests. GFS exerts a more substantial driving effect on RIC in less innovative regions, with heterogeneity observed. Specifically, GFS in the Chongqing region exerts a stronger positive effect on RIC than the other part in the Circle. In terms of mediating mechanisms, GFS enhances RIC through R&D human capital accumulation and increased R&D capital investment. Further testing identifies a single threshold effect for R&D human capital and a double threshold effect for R&D capital investment in the relationship between GFS and RIC .