Regional competition, spatial spillover effects, and entrepreneurship subsidy policies—evidence from incubators in Guangdong, China

Ho-Jyun Wong, Wenxia Tong and Weikun Zhang

Applied Economics, 2025, vol. 57, issue 19, 2372-2388

Abstract: Using data from 2016 to 2018 for all incubators in Guangdong, China, we find that for start-up incubators, the average subsidy level of the city where the incubator is located is significantly positively correlated with the number of patents obtained per unit area of the incubator, regardless of the subsidy amount obtained by the incubator itself. However, this phenomenon is not significant for incubators that have been established for more than 1 year. The subsidy policy of the local government has a significant positive direct effect on the number of patents obtained per unit area of local incubators, but a significant negative indirect effect on incubators in neighbouring regions. Both effects are similar in magnitude, with the overall effect of the subsidy policy being almost completely offset. Therefore, owing to the spatial spillover effect, a considerable part of the effect of the local government subsidy policy only manifests as competition for high-quality enterprises between regions, and the actual improvement of the operational performance of the enterprises themselves is not obvious. Therefore, ignoring the spatial spillover effect of subsidy policies greatly reduces their actual effect.

Date: 2025
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DOI: 10.1080/00036846.2024.2324093

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