Contrasting Vertical Intergovernmental Interactions in Matching Fund Policy Implementation to Support Small and Medium-sized Enterprises in China

Abstract:This article uses evolutionary game theory to demonstrate a logically consistent explanation for the strategies of both superior and subordinate governments in different scenarios during the implementation of matching fund policy aimed at supporting the innovation activities of small and medium-sized enterprises. Through a case study of Shanghai, the article constructs a political interest–fiscal opportunity cost–manpower input cost model to explain the gaming behaviour of superior and subordinate governments. It further identifies a new form of project alienation in which subordinate governments conspire with enterprises to avoid providing matching funds and the causes of such alienation.