Effects Of Joint Government Subsidies And Tax Incentives On Firm Innovation

Innovation is the primary driving force for development,and firms are important players in promoting technological innovation.Government subsidies and tax preferences have received much attention since they are important national fiscal and taxation policies to stimulate firm innovation.Existing researches have focused on analyzing the specific incentive effects of each fiscal and tax policy,but the coordination effects of the two are rarely discussed.Therefore,this paper focuses on the implementation and coordination effects of government subsidies and tax preferences on firm innovation incentives.Firstly,based on the classic theory and literature review,this paper starts from the profit function,not only analyzes the interaction effects between government subsidies and tax incentives from a theoretical point of view but also emphasizes that these two policies are not simply complementary or alternative relationships.They both have threshold effects in different spaces.At the same time,based on paying attention to the effects of government subsidies and tax preferential single-line policies,this paper also emphasizes the effects of these two policies in parallel on firm R&D incentives,and further considers the differences in the effects of coordination in different firm ownerships,regions,industries and R&D intensity,thus put forward corresponding theoretical hypotheses.Secondly,this paper uses 2012-2016 China A-share listed firm data to describe the typical facts of government subsidies and tax preferences on stimulating innovation.The results show that government subsidies have a positive incentive effect on firm innovation,but blindly pursuing high government subsidies cannot achieve the best innovation incentive effect.However,higher tax incentives can continue to stimulate firm innovation,which also explains to a certain extent the rationality of moderate government subsidies and increased tax incentives.Thirdly,this paper uses a fixed effect regression method and a threshold regression model to empirically test the effects of government subsidies and tax preferences on single-line and parallel incentives for firm R&D investment.The empirical results show that,on the one hand,government subsidies and tax incentives can stimulate firm innovation,and the incentive effect of tax incentives is better than government subsidies.Among them,government subsidies as an ex-ante incentive reduce the financing pressure of the firm and increase the expected income of the firm,thereby promoting R&D investment;and tax incentives as an ex-post incentive reduce the firm's R&D costs and promote firm capital accumulation and innovation reinvestment.At the same time,there is obvious heterogeneity in the effects of government subsidies and tax incentives on innovation incentives in firms of different ownerships,industries,regions and R&D intensity.On the other hand,the incentive effect of tax incentives will change as the intensity of government subsidies continue to increase.When government subsidies are low,tax incentives have a strong incentive effect;when government subsidies are too high,policy crowding-out effects will occur.In contrast,the innovation incentive effect of government subsidies will continue to increase with the increase of tax incentives.Finally,on the basis of summarizing the conclusions of the full text,this paper provides corresponding policy suggestions from the four aspects,the implementation of fiscal and taxation policies,policy recommendations based on heterogeneity control of policy implementation intensity and mainly using tax preferences and supplemented by government subsidies.