Abstract: With the implementation of the innovation-driven development strategy, technological innovation has gradually become the new yardstick for official promotion; and the competitive landscape of local governments is also changing, which can affect corporate innovation activities through the “visible hand”. The findings of an empirical study based on the data of China’s A-share listed companies and prefecture-level cities from 2007 to 2018 show that there is a strategically complementary competition in local governments’ spending on science and technology. And this kind of competition is more obvious in the samples from the eastern region during the period of 2013-2018, when the chief officials are in their second term. This reveals that innovative competition has become a new competition model among local governments. It is found from further analysis that government innovation competition has significantly promoted enterprise technological innovation, and this incentive effect has shown an inverted U-shaped characteristic of first growth then weakening as the level of enterprise innovation improves. The mechanism test results show that the governments’ competition around technological innovation will increase enterprise innovation subsidies and tax incentives, and improve the level of regional industrial agglomeration, which can improve the corporate innovation environment both internally and externally, so as to promote enterprises’ technological innovations.

Key words: local government spending on science and technology, innovation competition, enterprise innovation, promotion of officials