Government subsidies and green innovation in Chinese enterprises-based on the synergy of executive incentives

ABSTRACT

Based on the micro data of China’s heavily polluting enterprises from 2010 to 2019, this article analyzes the synergistic effect of government subsidies and executive incentives on green innovation. It is found that government subsidies significantly promote the output of innovation results, and this effect has a time lag. Executive compensation incentives will weaken the current policy effect, and the benefit convergence effect produced by equity incentives can reverse executives’ short-sighted thinking. Although the current impact of equity incentives is not significant, it can play a substantial synergistic effect in the first and second lag periods. It is proved that the green innovation of heavy pollution enterprises can not only consider the impact of exogenous policy but ignore the perfection of internal governance mechanism.

KEYWORDS:

• Government subsidies
• green innovation
• China’s heavy pollution enterprise
• compensation incentive
• equity incentive

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

This work was supported by Shannxi Province Social Science Fund Program [grant numbers 2020D017, 2022HZ0540]; “Rural Revitalization” Special scientific research Project of Shaanxi Normal University [grant number 22XCZX08].

Notes on contributors

Hu Liu

Hu Liu got his PhD in Industrial Economics from Xi’an Jiaotong University, China. He is currently an associate professor and master tutor at International Business School, Shaanxi Normal University, China. His research direction is industrial economics and corporate governance.

Xiaoxuan Yu

Xiaoxuan Yu received a bachelor’s degree in financial management from Shaanxi Normal University, China. She is now a master’s student in business management at Shaanxi Normal University International Business School, China. Her research interests focus on industrial economics and innovation management.

Yijun Peng

Yijun Peng received a bachelor’s degree in financial management from Shaanxi Normal University, China. She is now a master’s student in business management at Shaanxi Normal University International Business School, China. Her research interests focus on accounting policies and innovation management.