Can government-guided funds promote innovation output in strategic emerging enterprises? Evidence from China

This is the authors' abstract. We don't add key points for this paper.

Using 9,138 observations from 731 strategic emerging enterprises in China's A-share market between 2010 and 2023, this study explores the impact of government-guided funds on innovation in these enterprises and their underlying mechanisms. The main empirical findings are as follows: Firstly, there is a positive correlation between government-guided funds and innovation output in strategic emerging enterprises, and their endogeneity and robustness have been tested using instrumental variable methods and a series of other methods. Secondly, government-guided funds significantly enhance corporate innovation output through two pathways: one is by alleviating financing constraints on technological R&D; the other is by enhancing companies' ability to access policy resources such as tax incentives. Thirdly, heterogeneity tests indicate that the innovative incentive effect of government-guided funds is more pronounced in eastern regions, state-owned enterprises, and companies with higher capital intensity from downstream customers. This study focuses on strategic emerging enterprises, providing a new perspective on the impact of government-guided funds on corporate innovation.