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We use Chinese listed firms from 2010 to 2016 to explore the incentive mechanism and the differential effect of 27 provincial government efficiency on enterprise innovation. We find that the government efficiency positively affects the innovation investment and output. The government efficiency helps reduce rent-seeking opportunities; hence, rent-seeking firms react more positively to government efficiency. We also find that high-tech industry membership and state-ownership affect the incentive mechanism of government efficiency for enterprise innovation.
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Han et al. (2019) studied this question.
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