Impact of Government-Guided Funds on Regional Innovation Capacity

As a promising initiative in the market-oriented operation of government fiscal funds, government-guided funds have become a key driver of innovation and development in the science and technology sector. Against this backdrop, how local governments can leverage this policy tool in a manner tailored to local conditions to enhance regional innovation capacity has emerged as a core issue requiring in-depth exploration. Incorporating capital allocation efficiency and the level of industrial agglomeration, this study analyzes the relationship and impact mechanisms between government-guided funds and regional innovation capacity based on a fixed-effects model with panel data from 30 provincial-level administrative regions in China from 2010 to 2024 as the research sample. The study finds that government-guided funds effectively enhance regional innovation capacity through a dual mechanism of optimizing capital allocation efficiency and elevating industrial agglomeration levels. Moreover, the regional institutional environment exerts a significant positive moderating effect on the relationship between government-guided funds and regional innovation capacity. Compared to central and western regions, eastern regions have more fully realized both the innovation-promoting effects of government-guided funds and the moderating effects of the institutional environment, leveraging well-developed market-oriented mechanisms and intellectual property protection systems.