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

Abstract

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.