The Mixed Incentive Effect of Government Subsidies and Venture Capital on the Sustainability of Enterprise Innovation

The innovation effects of enterprises receiving subsidies remain a widely debated issue in academic research. Using the Control Function (CF) method, this study integrates government subsidies and venture capital into a unified framework to examine their combined incentive effects on the sustainability of firm innovation. Survival analysis is employed to compare the probability of enterprises ceasing innovation under a single-subsidy mechanism versus dual-financing conditions. The findings reveal that the interaction of public subsidies and private capital produces a significant complementary effect, generating stronger and broader stimulation of continuous innovation activities than government subsidies alone. In the technology-intensive industry sample, the synergy of subsidies and venture capital reduces the probability of innovation discontinuation by approximately 6.4%. Results from the Cox proportional hazards model further indicate that determinants of sustained innovation differ depending on enterprises’ levels of effective patent output. These empirical results advance the understanding of corporate innovation financing, enrich theoretical perspectives in the field, and provide practical implications by highlighting the importance of combining public and private financing to foster sustainable innovation, thereby supporting China’s innovation-driven development strategy.