Could government lead funds improve the enterprises’ AI output?

In the context of China’s strategic layout in artificial intelligence, we find that Government-lead funds (GLFs), as a policy tool of the government, can effectively improve enterprises’ AI output. Mechanisms tests show that GLFs can alleviate financial constraints, promote leverage effect and R&D input to promote AI output. This impact is more significant for non-SOEs, high-tech industries, enterprises in regions with higher level of local marketization and government guidance, city level GLFs, industry GLFs and limited partnership GLFs. Our findings have an important practical significance for China and other emerging economies to grasp the strategic initiative of AI development worldwide.