The impact of supply-demand innovation policy instrument mix on firm innovation: Empirical analysis from the perspective of firm life cycle

The varying firm life cycle stages represent a critical factor that should be accounted when evaluating the effects of innovation policy instrument mixes. Building on firm life cycle theory, this study employs the Poisson pseudo-maximum likelihood estimator with high-dimensional fixed effects (PPML-HDFE) to explore the impact of three supply and demand side innovation policy instruments (innovation subsidies, tax incentives, and public innovation procurement) and their mixes on firm innovation across different life cycle stages. The results reveal that, overall, the supply-demand policy instruments mixes outperform individual instruments in incentivizing innovation, particularly for high-tech manufacturing firms. Furthermore, mature-stage firms demonstrate superior capacity to leverage policy support, achieving the most significant innovation gains, regardless of the specific form of instruments or their mixes. The findings suggest policymakers should transcend conventional thinking and policy biases, placing particular emphasis on firms' developmental stages, practical needs, and comparative advantages. Policy formulation should transform from a "one-size-fits-all" approach to differentiated and targeted strategies, thereby enhancing the actual empowerment effect of policies on innovation development.