Abstract:
In the context where innovative enterprises urgently need financing while government guidance funds still have retained capital, can fault tolerance mechanisms balance the high risks of enterprises with the safety of fiscal funds, effectively enhance the support of government guidance funds for enterprises? This study finds that: (1) Fault tolerance mechanisms provide enterprises with room for trial and error, significantly promoting the simultaneous improvement in both the quantity and quality of corporate innovation. The effects are more pronounced among micro, small, and medium-sized enterprises, growth-stage firms, and enterprises receiving local industrial policy support, as well as in cases where management institutions are state-owned entities or where the funds are established at higher administrative levels. (2) Fault tolerance mechanisms influence the investment decisions of government guidance fund managers, significantly alleviating financing constraints of innovative enterprises, thereby enhancing innovation performance. On the one hand, due diligence exemption clauses prevent the attribution of project failures caused by uncontrollable factors to management institutions, incentivizing managers to invest boldly and enterprises to innovate courageously. On the other hand, investment failure tolerance thresholds stipulate the maximum acceptable capital loss ratio for government guidance funds, providing a relatively tolerant environment for corporate innovation expenditures. (3) Compared with implementing the due diligence exemption system alone, simultaneously establishing investment failure tolerance thresholds yields more significant effects. (4) As investment failure tolerance thresholds increase, both the quantity and quality of corporate innovation first rise and then decline, exhibiting an inverted U-shaped relationship; the setting of failure tolerance thresholds needs to balance innovation incentive effects against moral hazard concerns. This study enriches the literature on the internal operational mechanisms of government guidance funds and provides empirical support for actively implementing fault tolerance mechanisms to promote corporate innovation.
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