Financial subsidies, tax incentives, and innovation quality: empirical evidence from high-tech enterprises in Sichuan Province, China / Qiuhong Liu, Rani Diana Othman and Siti Nurhazwani Kamarudin

Innovation has become a crucial driving force for economic development now. In 2023, the Sichuan Province in China ranked 10th nationwide in innovation capability, indicating the need for further breakthroughs. Between 2016 and 2020, the Sichuan Province witnessed a total of 35 companies going public, with 26 of them being high-tech enterprises, accounting for 74.29%. Therefore, the overall improvement in innovation capability needs to be built upon the original innovation capacity of high-tech enterprises. Financial subsidies and tax incentives are often used to improve innovation quality, but their effectiveness is a subject of controversy. This study selected 34 high-tech enterprises from the Sichuan Province listed on the Shanghai and Shenzhen stock exchanges as research samples. Using relevant data from 2017 to 2022, the study empirically examined the impact of financial subsidies and tax incentives on the innovation quality of these enterprises. The research found that both individuals had a positive stimulating effect on innovation quality. However, when these two policies were implemented simultaneously, the incentive effect was weaker compared to the impact of each policy individually.