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The Impact of Industrial Subsidies and Enterprise Innovation on Enterprise Performance: Evidence from Listed Chinese Manufacturing Companies

Author

Listed:
  • Shuai Wang

    (School of Economics, Lanzhou University, Lanzhou 730000, China)

  • Fayyaz Ahmad

    (School of Economics, Lanzhou University, Lanzhou 730000, China)

  • Yanlong Li

    (School of Economics, University of Chinese Academy of Social Sciences, Beijing 100732, China)

  • Nabila Abid

    (Department of Economia Aziendale, University of “Gabriele d’Annunzio” Chieti-Pescara, 65127 Pescara, Italy)

  • Abbas Ali Chandio

    (College of Economics, Sichuan Agricultural University, Chengdu 611130, China)

  • Abdul Rehman

    (College of Economics and Management, Henan Agricultural University, Zhengzhou 450002, China)

Abstract

Governments worldwide have introduced various tax mechanisms to foster enterprise innovation, which in turn affect enterprise performance. To promote the innovation level of domestic enterprises, China has adopted an innovation-driven strategy policy. Based on China’s manufacturing company data from 2007 to 2017, this article constructs a mediating effect model to study the direct effect of tax incentives and government subsidies on enterprise performance and the mediating effect of innovation on enterprise performance. We use RIF regression to investigate the difference between the effect of industrial subsidies on promoting technological innovation and enterprise performance. The study finds that tax incentives and government subsidies encourage enterprise performance through innovation, with the mediating effect accounting for about 34.5% and 16.8%, respectively. Industrial subsidies play a more obvious role in improving the innovation performance of high-tech enterprises. There is no significant difference in tax incentives on the performance of large enterprises and small and medium-sized enterprises. Moreover, government subsidies play an essential role in promoting the performance of large enterprises. Furthermore, with the increase in quantile, the impact of tax incentives and government subsidies on innovation is getting more extensive and more significant. Innovation has an increasing effect on enterprise performance, the effects of tax incentives on enterprise performance are becoming less and smaller, and the nexus of government subsidies and enterprise performance is generally unchanged. Therefore, implementing appropriate tax incentives and government subsidies for enterprise innovation is essential for improving enterprise performance, especially for high-tech enterprises. Enterprise size should not be used as a criterion for the government to implement tax incentives, although government subsidies tend to support large enterprises.

Suggested Citation

  • Shuai Wang & Fayyaz Ahmad & Yanlong Li & Nabila Abid & Abbas Ali Chandio & Abdul Rehman, 2022. "The Impact of Industrial Subsidies and Enterprise Innovation on Enterprise Performance: Evidence from Listed Chinese Manufacturing Companies," Sustainability, MDPI, vol. 14(8), pages 1-17, April.
    • Handle: RePEc:gam:jsusta:v:14:y:2022:i:8:p:4520-:d:790933
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    References listed on IDEAS

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    2. Huasheng Zhu & Ruobin Liu & Bo Chen, 2023. "The Rise of Specialized and Innovative Little Giant Enterprises under China’s ‘Dual Circulation’ Development Pattern: An Analysis of Spatial Patterns and Determinants," Land, MDPI, vol. 12(1), pages 1-26, January.

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