Fiscal innovation subsidies, factor allocation, and SME export performance: evidence from China’s innovation fund for technology-based SMEs

Exports by small and medium-sized enterprises (SMEs) are an important driver of national economic development. Using China’s Innovation Fund for Technology-Based SMEs as a quasi-natural experiment, this study examines how fiscal innovation subsidies affect manufacturing SMEs’ export performance. A staggered difference-in-differences model estimates an increase in export performance of 2.13% points, equivalent to approximately 3.67% of the sample mean. The export-promoting effect is stronger for firms receiving larger subsidies than for those receiving smaller subsidies. Loan interest subsidies also have a stronger effect than non-repayable grants. Across production-chain positions, the estimates indicate positive effects for both upstream and downstream firms, with no statistically significant difference between the two groups. Estimated effects are weaker for midstream firms. Effects are also stronger in regions with higher local fiscal expenditure intensity on science and technology. Mechanism tests indicate that fiscal innovation subsidies improve firms’ technological innovation capacity, production efficiency, and export performance by promoting the embeddedness of technology service inputs, increasing invention patent output, and expanding the allocation of imported inputs and intermediate goods. This study provides firm-level empirical evidence for optimizing subsidy intensity, selecting policy instruments, and tailoring innovation support to firms’ production contexts and regional conditions.