The Impact of Green Innovation on Enterprise Performance: The Regulatory Role of Government Grants

Abstract

Green innovation has become an essential pathway to quality manufacturing development. This paper takes green innovation as a starting point to explore the impact of green innovation on enterprise performance and the regulatory effect of government grants, including fiscal subsidies and preferential taxation. An empirical study based on panel data of manufacturing firms listed in Shanghai and Shenzhen A-shares from 2011 to 2019 shows that green innovation contributes to improved enterprise performance. This paper studies the moderating impacts of financial subsidies and tax incentives using the Ordinary Least Squares (OLS) Model with consideration for the two-way fixed effects. The model adopts Tobin’s Q value as the explained variable and focuses on analyzing the influence mechanism of green innovation, financial subsidies, and tax incentives. Both fiscal subsidies and preferential taxation can strengthen the relationship between green innovation and enterprise performance, with the incentive effect of preferential tax being more pronounced when the two policies are pursued in parallel. In general, the regulatory impact of preferential taxation is more pronounced in high-tech manufacturing, while that of fiscal subsidies is in traditional manufacturing. Therefore, this study aims to provide reference suggestions for enterprises and governments to focus on green innovation and rationalize the use of government grants to improve enterprise performance.