Proceedings of the International Conference on Information Economy, Data Modeling and Cloud Computing, ICIDC 2022, 17-19 June 2022, Qingdao, China

Research Article

The Effect of Public Subsidies on Innovation Investment Decision of Enterprises Based on Mean Variance Model Analysis

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  • @INPROCEEDINGS{10.4108/eai.17-6-2022.2322683,
        author={Jidong  Li and Fenghua  Wang and Xiping  Wang},
        title={The Effect of Public Subsidies on Innovation Investment Decision of Enterprises Based on Mean Variance Model Analysis},
        proceedings={Proceedings of the International Conference on Information Economy, Data Modeling and Cloud Computing, ICIDC 2022, 17-19 June 2022, Qingdao, China},
        publisher={EAI},
        proceedings_a={ICIDC},
        year={2022},
        month={10},
        keywords={innovation investment; public subsidy; investment decision model},
        doi={10.4108/eai.17-6-2022.2322683}
    }
    
  • Jidong Li
    Fenghua Wang
    Xiping Wang
    Year: 2022
    The Effect of Public Subsidies on Innovation Investment Decision of Enterprises Based on Mean Variance Model Analysis
    ICIDC
    EAI
    DOI: 10.4108/eai.17-6-2022.2322683
Jidong Li1,*, Fenghua Wang1, Xiping Wang2
  • 1: Hebei University of Economics and Business
  • 2: Hebei University of Economics & Business
*Contact email: Lijidong1973@126.com

Abstract

Based on the quadratic utility function and mean variance assumption, an innovation project investment decision model is established. In the model, innovative enterprise can choose to invest in innovative or non-innovative project. Enterprise manager is decision-maker, he determines the optimal level of effort and allocates his funds to innovative or non- innovative projects with the goal of maximizing the expected utility of investors, which is equivalent to maximizing the sharp ratio of the enterprise. It can be proved by the model that the amount of investment in innovative projects increases and the scope of investment can expand because of public subsidies. The investor will allocate more capital to innovative enterprises in that public subsidies increase the rate of return of innovative enterprises.