Abstract: By making use of the data of high-tech enterprises in Jiangsu province, this paper conducts an empirical study of the relationship between government fiscal encouragement, resource capacity and corporate innovation. The result shows that government fiscal encouragement and resource capacity have a significant positive effect on corporate innovation. Further study shows that the effect of tax reduction policies is better than that of subsidy policies, and this kind of effect is more obvious in the “state-owned enterprise group”. Therefore, to strengthen the self-competitiveness of enterprises, to adjust and improve the fiscal incentive modes and objects are effective measures to enhance the corporate innovations.

Key words: fiscal encouragement; resource capacity; corporate innovation; tax reduction; fiscal subsidy