Abstract: Government innovation subsidies and additional deduction for R&D expenses are important policy instruments to encourage enterprises to carry out exploratory and developmental innovation and to improve China's basic innovation capacity. Existing studies have mostly focused on the impact of government innovation subsidies on enterprises' dual innovation, and few have explored the effect of the policy of adding deduction for R&D expenses and included the two policies in the comparative analysis of the same theoretical framework. Using the data of A-share listed companies from 2008 to 2022, this paper finds that due to the difference in the design of policy mechanism, government innovation subsidy promotes dual innovation of enterprises, while additional deduction for R&D expenses only promotes the developmental innovation of enterprises, and there is no incentive for exploratory innovation, and this effect is not found in non-state-owned enterprises, eastern region enterprises, and enterprises in regions with a higher degree of marketization are more significant. Mechanism tests show that the level of market competition, the degree of managerial myopia and financing constraints are important mediating channels, and there is a difference in the effects of the two types of policies on the mediating variables, which results in different impacts on firms' dual innovation. Further analysis reveals that government innovation subsidies alone increase firms' preference for exploratory innovation; multiple large shareholders can play a corporate governance function and enhance the effect of the two types of policies on firms' dual innovation promotion.

Key words: government innovation subsidies, additional deduction for R&D expenses, exploratory innovation, exploitative innovation, policy mechanism design, corporate governance