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Policy-mix and SME innovation: Evidence from China

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  • Kai Zhao
  • Haonan Shan
  • Yu Gao

Abstract

The question of whether and how innovation policy can effectively influence innovation in small and medium-sized enterprises (SMEs) has received limited attention in academic research. This study takes a first step towards filling this gap by examining how innovation policy and policy mixes influence innovation in SMEs. This paper takes China’s National Equities Exchange and Quotations (NEEQ) listed enterprises from 2011 to 2020 as the research sample, and uses the Multi-Level Treatment Effect (MLTE) model to investigate the actual impact of different innovation policies on Small and Medium-sized Enterprise innovation and the heterogeneity of policy effects from the perspective of substantive and strategic innovation. It is found that innovation policies can obviously improve the innovation of SMEs, in particular the substantive innovation, and the effect of policy-mix in stimulating SME innovation is stronger than that of single innovation policy. SMEs that show “strong motivation” and “high ability” in innovation are more likely to be favored by relevant government agencies, and have a greater probability of becoming the implementation targets of innovation policies. As far as single innovation policies are concerned, government subsidy is better than tax incentive for high-tech SMEs, while tax incentive has a stronger role in promoting innovation than government subsidy for non-high-tech SMEs. By illuminating these differentiated impacts and the conditions under which innovation policies are most effective, this work not only advances our fundamental understanding of policy-driven innovation ecosystems but also offers actionable guidance to policymakers seeking to optimize the allocation of support to foster transformative innovation in the SME sector.

Suggested Citation

  • Kai Zhao & Haonan Shan & Yu Gao, 2025. "Policy-mix and SME innovation: Evidence from China," PLOS ONE, Public Library of Science, vol. 20(2), pages 1-18, February.
    • Handle: RePEc:plo:pone00:0319080
    DOI: 10.1371/journal.pone.0319080
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    References listed on IDEAS

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    1. Boris Lokshin & Pierre Mohnen, 2012. "How effective are level-based R&D tax credits? Evidence from the Netherlands," Applied Economics, Taylor & Francis Journals, vol. 44(12), pages 1527-1538, April.
    2. Raven, Rob & Walrave, Bob, 2020. "Overcoming transformational failures through policy mixes in the dynamics of technological innovation systems," Technological Forecasting and Social Change, Elsevier, vol. 153(C).
    3. Hannan Amoozad Mahdiraji & Seyed Hossein Razavi Hajiagha & Vahid Jafari-Sadeghi & Donatella Busso & Alain Devalle, 2023. "Towards financing the entrepreneurial SMEs: exploring the innovation drivers of successful crowdfunding via a multi-layer decision-making approach," European Journal of Innovation Management, Emerald Group Publishing Limited, vol. 27(7), pages 2275-2301, March.
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