Crowding-in or Crowding-Out?
——A Study on the Hierarchical Heterogeneity of Government Guidance Funds
Yating Sun
(1.School of Business, Macau University of Science and Technology, Macau, 999078)
Abstract: Technological innovation is an inexhaustible driving force for modern socio-economicdevelopment. The healthy growth of technology-based start-ups relies heavily on the long-term, stablecapital investment and policy guidance of patient capital, of which government guidance funds are aprime example. However, academic debate remains on whether government guidance funds caneffectively promote corporate innovation, and insufficient attention has been paid to the heterogeneouseffects of funds at different administrative levels. This paper empirically examines the impact ofgovernment guidance funds on corporate R&D investment using a staggered two-way fixed effectsmodel with a sample of the Growth Enterprise Market (GEM) and STAR market listed companies from 2016 to 2021, focusing particularly on the heterogeneous effects of fund administrative levels.The findings are as follows: First, in the full sample, government guidance funds have no significantaverage impact on corporate R&D investment. Second, heterogeneity analysis reveals that the negativeimpact of government guidance funds is mainly concentrated in national and provincial-level funds,while municipal-level and lower-level funds show no significant effect. These conclusions remainrobust after a series of checks, including replacing the dependent variable, placebo tests, excludingmunicipalities, and using heterogeneous-robust DID estimation. The contribution of this paper lies inrevealing the heterogeneous effects of government guidance funds on corporate innovation from theperspective of fund hierarchy, thereby supplementing the theoretical literature on crowding-out effects.Based on the findings, this paper proposes policy recommendation, including clarifying themanagement boundaries of high-level funds, establishing an exculpatory liability system, andconstructing a performance evaluation system. These provide empirical evidence and policy referencesfor optimizing the institutional design of government guidance funds and preventing potential resourcemisallocation.
Keywords: Government Guidance Funds; Corporate Technological Innovation; Heterogeneous Treatment Effects
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