Research On The Impact Of Financial Subsidies On Enterprise Innovation From The Perspective Of Life Cycle

Innovation is not only the most fundamental driving force for sustainable economic growth,but also an intrinsic support for improving national comprehensive national power,which is of great significance for improving national core competitiveness.However,due to the externality of enterprise innovation,it is difficult to avoid the "market failure problem" such as insufficient investment in innovation and market inefficiency.In order to compensate for the loss of efficiency of enterprises,strengthen their core technology research and development,and improve the level of innovation,China has adopted fiscal subsidies as an important policy tool,hoping to stimulate more enterprises to engage in innovation activities.At present,the fiscal subsidy policy is universal and extensive,but there is heterogeneity in the enterprises engaged in innovation activities.Enterprises are always in dynamic development,and their life cycle stages change with the development of their business,while innovation activities are always in progress.As enterprises enter different life cycle stages,the innovation environment and problems they face change,which leads to the difference in the impact of financial subsidies on enterprise innovation.How to maximize the effect of financial subsidies is the key issue we need to consider and solve.Therefore,this paper explores the impact of financial subsidies on enterprise innovation from the perspective of enterprise life cycle.This paper firstly compares the literature on the impact of financial subsidies and enterprise life cycle on enterprise innovation to lay the foundation for the research.Secondly,we define the concepts of fiscal subsidies,enterprise innovation and enterprise life cycle,and use externality theory,information asymmetry theory,signaling theory and endogenous growth theory as the theoretical basis to explain the necessity of fiscal subsidies for enterprise innovation.Furthermore,the overview of China’s fiscal subsidy policy to promote enterprise innovation and the current situation of enterprise innovation are analyzed,and the current problems are pointed out.Finally,this paper takes the A-share listed enterprises from 2013-2020 as the research sample,divides the listed enterprises into growth stage enterprises,maturity stage enterprises and decline stage enterprises according to the cash flow model approach,and applies the two-way fixed effect model to test the impact of financial subsidies on enterprise innovation from the life cycle perspective.This paper also performs robustness checks by instrumental variable analysis,using Tobit model and reclassification of firm life cycle.In addition,the heterogeneity analysis further considers the heterogeneity of enterprise types and classifies enterprises into high-tech and non-high-tech enterprises,and explores the impact of financial subsidies on innovation of different enterprises in the context of enterprise life cycle,with the intention of analyzing the actual effect of financial subsidies in a more comprehensive manner.The findings of this paper are as follows: Firstly,fiscal subsidies can significantly promote enterprise innovation in China in general.Secondly,the incentive effect of financial subsidies on enterprise innovation is differentiated by the life-cycle stage of enterprises.Specifically,financial subsidies have a significant promotion effect on both growth stage and maturity stage enterprises,while the effect on declining stage enterprises does not pass the significance test.Thirdly,in terms of heterogeneity analysis,from the perspective of differentiating the types of enterprises,financial subsidies are more conducive to promoting innovation in high-tech enterprises in the growth and maturity stages,while there is no significant incentive effect for non-high-tech enterprises in all stages of the life cycle.Finally,this paper proposes the following policy recommendations: First,financial subsidies are an important incentive policy in China,and the government should continue to increase financial subsidies to support the innovation activities of Chinese enterprises.Second,the government should take into account the different life cycles of enterprises when formulating financial subsidies,design appropriate financial subsidies around the development status of enterprises,change the traditional "one-size-fits-all" financial subsidies,and improve the accuracy of subsidies.The government should increase the financial subsidies for enterprises in the growth and maturity stages to improve their innovation output;for enterprises in decline,the government should introduce financial subsidies to help them transform and upgrade,so as to provide sufficient funds for them to enter a new life cycle and renew their innovation vitality.For high-tech enterprises,the government should focus on supporting them,mobilizing their enthusiasm to carry out innovative activities and maximizing the policy effect.Third,the government should strengthen the supervision of the use of financial subsidies,reduce the influence of rent-seeking behaviors,establish a financial subsidy system centered on the credit of subsidy use,give priority to subsidizing enterprises with good credit,ensure the fairness of subsidy use,and improve the efficiency of subsidy use.