Impact of government funding for science and technology on regional innovation capability: An empirical study on a key economic and technological innovation zone in China

Abstract

Innovation capability serves as a crucial driving force for regional economic growth. In this empirical study, we investigate if and how government funding for science and technology (GFS) can promote regional innovation capability (RIC), by taking Chengdu-Chongqing Economic Circle as an example. The Circle is a key economic zone in China, with a population of more than 98 million and GDP of more than 1.1 billion USD. Using the panel data of all 44 prefecture-level cities (districts and counties) in the zone from 2011 to 2020, a systematic research methodology, consisting of panel model, mediating effect model, and threshold effect model, is adopted in the analysis. The results demonstrate that GFS significantly promotes RIC, as confirmed by multiple robustness tests. GFS exerts a more substantial driving effect on RIC in less innovative regions, with heterogeneity observed. Specifically, GFS in the Chongqing region exerts a stronger positive effect on RIC than the other part in the Circle. In terms of mediating mechanisms, GFS enhances RIC through R&D human capital accumulation and increased R&D capital investment. Further testing identifies a single threshold effect for R&D human capital and a double threshold effect for R&D capital investment in the relationship between GFS and RIC.