The Differentiated Role of Government Support in Fostering Innovation: Evidence from Smallholder Aquaculture in China

The global aquaculture sector faces mounting pressure to transition towards sustainable production, with innovation being a critical lever for change, especially among smallholder farmers who dominate the industry. This study examines the drivers of innovation in China’s freshwater aquaculture sector by constructing a multi-dimensional innovation index—encompassing infrastructure, machinery, inputs, environmental management, and production models—and analyzing survey data from 336 farmers. Our findings reveal that direct government funding is significantly associated with innovation, but its effect is narrow, primarily linked to machinery upgrades, and effective only in the developed eastern region. In contrast, indirect support through technical training shows a broader, stronger, and more consistent association with innovation across all types, with effects lagging by 1–2 years and yielding the highest returns in less-developed western China. Notably, farmers’ ex post evaluations of training are a stronger predictor of innovation than training frequency itself, underscoring the importance of quality and relevance. We further find that production scale and industrial organization are positively associated with innovation, with no evidence of an inverted U-shaped relationship, reflecting the sector’s small-scale structure. These results highlight the need for a differentiated policy approach: prioritizing high-quality, demand-driven training nationwide; targeting direct funding to where complementary capacities exist; and fostering cooperatives and scale-enhancing institutions to systematically strengthen the sector’s innovative capacity.