Fiscal Pressure, Local Government Behavior And Corporate Innovation

Since reform and opening,the Chinese economy has experienced a miraculous growth.In addition to relying on factor inputs,technological innovation has also played a very important role in it.China's R&D investment has increased from less than 1%of GDP in the early 1990 s to more than 2% at present,which has reached the level of middle developed countries and ranking in the forefront of developing countries.China's innovation output has also made great progress.The number of patent applications has increased dramatically from 45,564 in 1995 to more than 183 million in 2017.Since 2011,China has replaced the United States as the largest country in the world with the most innovation outputs.It can be said that the driving force for innovation in China's economic development is gradually being reflected,and the role of innovation in economic and social development has been unprecedentedly strengthened.However,we have to admit that China's overall innovation capacity is still insufficient,and there is still a big gap compared with developed countries.At the same time,there is still existing large regional differences in China's innovation capabilities.In general,the eastern region has the strongest innovation capability,followed by the central region and the western region.Although some scholars have found the problem of regional innovation output disparity in China,there are few studies on the influencing factors of regional innovation output disparity,and little attention has been paid to the important role of government behavior in it.Enterprise is the main body of scientific and technological innovation,while local government is the important promoters of real economic development and good government-market relations is the necessary guarantee for the realization of innovation-driven strategic transformation.From the perspective of local government,this paper chooses enterprise innovation as the main research object,and examines the impact of local government behaviors on enterprise innovation output under fiscal pressure and fiscal incentive mechanism in China.Specifically,this paper is divided into seven chapters.The first chapter is the introduction,which summarizes the research backgrounds,main research contents and research significances,and systematically combs the overall context and ideas of the article.The second chapter is literature review.This paper summarizes and combs the existing literatures from three aspects: the macroscopic and microscopic factors of enterprise innovation,local government behaviors under fiscal pressure and the impact of local government intervention on enterprise innovatio,so as to lay the theoretical foundation for the research to be carried out in this paper,and to provide a solid foundation for better defining the marginal contribution of this paper.The third chapter investigates both the positive and negative impact of local fiscal pressure on enterprise innovation output and their impact mechanisms by constructing a model framework including fiscal pressure,local government behavior and enterprise innovation.Next,this paper verifies the theoretical analysis through the data of macro-government level and micro-enterprise level.The fourth chapter carries on the empirical analysis of the influence of fiscal pressure on enterprise innovation output.Based on the fact that the fiscal pressure has a negative impact on the overall innovation output of enterprises,which is the main find in the fourth chapter,the fifth chapter and the sixth chapter of this paper have empirically verified how local fiscal pressure can restrain the innovation output of enterprises.Among them,the fifth chapter believes that local governments have greater discretion in tax collection and management.Once they are forced to balance the pressure of fiscal revenue,they will often change the way in slashing taxes and fees,and instead strengthen the tax collection and management of enterprises.Even collecting an unlawful tax.The strengthen of tax administration has increased the actual tax burden of enterprises,and has also aggravated the ability of enterprises to adjust their financing,which has led to an increase in the cost of innovation and adversely affects corporate innovation.Chapter six considers that in addition to raising the actual tax rate,the local government can also increase fiscal revenue by expanding the tax base.On average,state-owned enterprises not only have higher tax contribution than other ownership enterprises,but also have stronger tax stability.State-owned enterprises can play a greater role than other ownership-type enterprises in making up for local government fiscal gaps.Under fiscal pressure,local governments will increase their reliance on state-owned enterprises.This not only hinders the optimal allocation of resources,but also distorts the market exit mechanism of enterprises,making it easier for non-state-owned enterprises which with higher innovation efficiency to withdraw from the market.The seventh chapter summarizes the main conclusions of this paper,and puts forward corresponding policy recommendations.At the same time,it also points out the shortcomings in the research and the prospects for future research.Based on the above research and demonstration work,this paper has obtained the following main conclusions: Firstly,local fiscal pressure has a negative impact on corporate innovation as a whole,and the negative effect of fiscal pressure on non-stateowned is more obvious than state-owned enterprises;the impact on export enterprises' innovation output is more obvious than non-export enterprises;when the region faces greater development pressure,the fiscal pressure on the enterprise innovation is more prominent;when the degree of marketization of the region is relative lower,fiscal pressure is more likely to have an negative impact on the innovation output of the enterprise.Secondly,the increase in the fiscal pressure of local governments has led to an increase in the tax burden of the enterprises in the jurisdiction.The increase in the tax burden of enterprises is mainly reflected in the more “flexible” corporate income taxation.Non-state-owned enterprises,enterprises charged by local tax bureaus and enterprises located in high development pressure and low degree of marketization areas are more affected;further analysis shows that the strengthening of local government tax administration is an important factor leading to the increase of tax burden;The tax burden of enterprises reduces the retained earnings and cash flow of enterprises,and also weakens the internal financing ability of enterprises,which intensifies the financing constraints of enterprises.All of these have led to an increase in the cost of innovation for enterprises,which has had a negative impact on corporate innovation.Thirdly,in areas with greater fiscal pressure,the value-added of state-owned enterprises accounts for a relatively large proportion.The dependence of state-owned enterprises caused by fiscal pressure is more prominent in areas with high economic development pressure and low degree of marketization.Faced with the impact of financial pressure,local governments are more likely to choose to expand the added value of local existing state-owned enterprises rather than attract new state-owned enterprises to invest locally,so as to further expand the total added value of local state-owned enterprises.In addition,bank credit support under government intervention is an important way for the development of state-owned enterprises under the background of financial pressure.Under financial pressure,there is insufficient evidence that local governments support the development of state-owned enterprises by increasing financial subsidies and using low-cost land sales.The dependence of state-owned enterprises distorts the effective allocation of resources,leading to more state-owned enterprises with lower innovation efficiency to survive in the market,while non-state-owned enterprises with higher innovation efficiency have a higher risk of withdrawing from the market due to the crowding of resources,which has a negative impact on the overall innovation level of regional enterprises.Compared with the previous literature,the marginal contribution of this work lies in: Firstly,it further enriches the economic effects of local government's behavior under the “pressure” fiscal incentive,and finds that the local governments have the “grasp hand” of enterprise's innovation behavior.Secondly,it reveals the channel mechanisms of local fiscal pressure affecting enterprise innovation output,which provides a new and reasonable explanation for regional innovation capability differences under the background of China's economic transformation.Thirdly,it explores in depth the micro-mechanism of local government behaviors affecting corporate innovation behaviors,which can more clearly shows the transmission chain of causal relations between “financial pressure”,“local government behavior” and “enterprise innovation”.Finally,the natural experimental research method adopted in this paper has better overcome the endogenous problem in the traditional research,which can improve the reliability and robustness of the conclusions.