Corporate sustainable development driven by high-quality innovation: Does fiscal decentralization really matter?

Abstract

High-quality innovation is the crucial way to promote corporate sustainable development. This paper explores the effect of fiscal decentralization on corporate innovation quality with hybrid data during 2006–2019. The findings show that fiscal decentralization can promote corporate innovation quality in China. This paper carries out various robustness tests, and the results remain consistent with the previous conclusion. The findings also suggest that fiscal decentralization can do better in promoting corporate innovation quality in higher-administrative-level cities, eastern regions, technology-intensive industries, and large-scale enterprises. Furthermore, this paper reveals that business cycle plays a moderating role in how fiscal decentralization affects corporate innovation quality, and the promotion effect is stronger in booms than in recessions. The findings also indicate that promotion incentive positively moderates the enhancement effect of fiscal decentralization on corporate innovation quality, while market integration negatively moderates this relationship. This study sheds new light on how fiscal decentralization affects corporate innovation quality, which is helpful for the government to promote high-quality innovation and corporate sustainable development in China.