Innovation Vouchers and the Sustainable Growth of High-Tech SMEs: Evidence from China

Abstract

Innovation has become an essential source of sustainable growth for most firms, especially small- and medium-sized enterprises (SMEs). Governments around the world widely implement innovation vouchers to promote innovation in SMEs. This study empirically explores the effects of innovation vouchers in stimulating patentable innovation and ultimately enhancing firms’ financial performance. Using a panel of 1274 listed SMEs from the Small and Medium Enterprise Board (SMEB) and the Growth Enterprise Board (GEB), we find that innovation vouchers lead firms to utilize knowledge-intensive services and significantly increase their financial performance. We further document that patentable innovations mediate the relationship between innovation vouchers and firms’ financial performance. We report that the effects of innovation vouchers on financial performance are more prominent for SMEs with limited external informational resources. We believe that our study yields novel evidence and sheds further light on the important policy implications of innovation vouchers to facilitate the sustainable growth of SMEs.