Financial Decentralization, Government Attention to STI and SME Growth

Small and medium-sized enterprises (SMEs), as the driving force of job creation and scientific and technological innovation in the new era, play a pivotal role in the growth and development of the enterprises with government support and financial resources rationing. Based on the reconstruction of the financial decentralization index (FEDC) using the CRITIC weight evaluation method, the impacts of financial decentralization and government attention to science and technology innovation on the growth of SMEs at the inter-provincial level in China from 2011 to 2021 are explored in depth with the help of the generalized moments estimation of dynamic panel system (SYS-GMM), extended regression model (ERM) and mediation effect model. The study finds that: (1) financial decentralization and government's attention to science and technology innovation can significantly expand SMEs' staff size and increase asset profitability; (2) government's attention to science and technology innovation is an important mediating variable of financial decentralization on SMEs' growth, which indirectly strengthens the effect of financial decentralization on the growth of SMEs; (3) the impacts of financial decentralization and government's attention to science and technology innovation on SMEs' growth have obvious heterogeneity characteristics; from the point of view of regional heterogeneity, the deepening of the degree of financial decentralization has the strongest incentive effect on the growth of SMEs in the western region relative to the east and central regions; from the point of view of the government size, financial decentralization has the strongest positive impact effect on SMEs' development of large-scale governments, followed by small and medium-sized governments. After conducting robustness tests, the conclusions still hold. Therefore, while continuing to promote the reform of the financial system in depth, it is important to focus on the matching of policies in both financial support and government guidance in order to promote the high-quality development of SMEs.