Design on Government Incentive Mechanism to Technological Innovation

This paper analyses the problem on government incentive mechanism to enterprise's technological innovation by means of the theory of principal-agent. First the paper discusses the government incentive mech-anism under two different conditions. The first condition is the level of firm's effort is observable, the second is firm's effort is unobservable. Then the paper proves consultation variables can reduce uncertainty of factors outside, decrease agent cost and thereby improve government incentive efficiency if information is asymmetry. At last the paper puts forwards some suggestions according to the three conditions respectively.