Optimizing Urban Technological Innovation through GGFs: A Systemic and Spatial Analysis

The implementation of the Government Guides Funds (GGFs) policy by China’s government plays an important role in guiding domestic private capital to participate in innovation and entrepreneurship activities. This study empirically analyzed the impact of GGFs in facilitating the domestic optimization process of urban innovation in China. Based on panel data from 285 cities from 2008 to 2021, this study uses the Spatial Durbin Model (SDM) to verify the impact of GGFs on urban innovation and its mechanism. The findings reveal that GGFs exert a positive influence on the urban innovation of both the immediate regions and the neighboring areas of the policy-origin city. The effectiveness of GGFs varies geographically, with more pronounced spatial spillover impacts observed in the eastern regions of China. Further research shows that industrial upgrading amplifies the direct impact of GGFs on urban innovation, while its indirect effectiveness is not significant. Finally, based on empirical findings, this study also underscores the necessity of local governments in tailoring the management of GGFs to local conditions and promoting sustainable urban innovation and regional development. Our findings provide noteworthy implications for governmental administrators and regulators in promoting the systemic optimization of GGFs operations within the context of sustainable urban development.