Research On The Influence Mechanism Of Government Subsidies On Enterprise Innovation From The Perspective Of Local Financial Pressure

Innovation can help enterprises gain competitive advantages and improve their performance.It can also help a country achieve stable and healthy development of national economy and gain international competitive advantages.However,due to the feature of high risk of failure and large spillover effect,enterprises are less motivated to participate in R&D activities,and it is necessary for the government to provide R&D subsidies to enterprises.The intensity and condition of government subsidies are closely related to the ability of government finance.In recent years,the reform of fiscal decentralization system and large-scale tax and fee reduction policies have intensified financial pressure.Whether the government will adjust the subsidies to enterprises when facing financial pressure,and whether it will affect corporation innovation behavior?Some studies have begun to pay attention to this problem,but more studies have investigated the impact of financial pressure on regional innovation from the macro level,while few literatures have explored the impact of financial pressure on enterprises,which are the main body of technological innovation.This paper attempts to explore from the micro level.This paper argues that facing financial pressure,the government tend to invest project with high tax sources and fast recovery,as much as possible to ease the financial pressure of the local government,because the enterprise has a strong incentive for more government resources,and hope to help government ease fiscal pressures by the way,then they will invest more subsidies and matching funds to the projects of short recovery period and stable income rather than innovation projects,at the same time,enterprises’ financial pressures maybe will rise because of cash shortage,then they will cut R&D spending,so the enterprise innovation output efficiency is lower.In view of this,this paper intends to use the data of China’s A-share non-financial listed companies from 2010 to 2019 to test the relationship among financial pressure,government subsidies and enterprise innovation,and further subdivide enterprise innovation into different categories to explore the impact of fiscal pressure on them.On this basis,this paper also explores the influence of property right nature and regional heterogeneity on the relationship among them.The empirical results show that financial pressure can inhibit the promotion effect of government subsidies on firm innovation,and the inhibition effect on substantive innovation is stronger.Moreover,this inhibiting effect is more obvious in state-owned enterprises and enterprises in central China.Finally,this paper puts forward some suggestions based on the empirical results and analysis.