Impact of Business Environment on the Innovative Incentive Effect of Fiscal and Tax Policies: A Dual Perspective of Intellectual Property Protection and Market Competition

Fiscal and tax policies are key instruments used by governments worldwide to stimulate enterprise innovation. In China, while these policies are widely implemented, their effectiveness varies across regions with different business environments. This study examines the impact of the business environment on the innovative incentive effect of fiscal and tax policies in China, employing a fixed effects panel model and considering the dual perspectives of intellectual property protection and market competition.

The study reveals that a favorable business environment generally enhances the positive effect of fiscal policies on enterprise innovation. Specifically, robust intellectual property protection systems are found to amplify the positive moderating effect on substantial innovation driven by tax incentives.

Furthermore, the research uncovers a 'U' shaped relationship between the innovative incentive effects of fiscal subsidies and tax incentives and the level of market competition. When market competition is low, both the strategic innovation incentive effect of fiscal subsidies and the substantial innovation incentive effect of tax incentives diminish as market competition intensifies.

Interestingly, the study finds that while the overall effect of tax incentives on innovation is not significant under the combined influence of intellectual property protection and market competition, the incentive effect on strategic innovation weakens, whereas the incentive effect on substantial innovation strengthens.

Finally, the analysis of different enterprise segments reveals that the innovation incentive effect of fiscal subsidies remains relatively consistent across different types of enterprises. In contrast, tax incentives demonstrate a more pronounced effect on promoting substantial innovation among high-tech enterprises, private enterprises, and large enterprises.

These findings contribute to a deeper understanding of how the business environment influences the effectiveness of fiscal and tax policies in stimulating enterprise innovation. The study provides valuable insights for policymakers aiming to optimize the impact of government incentives by fostering a conducive business environment that encourages and rewards innovation.