IDEAS home Printed from https://ideas.repec.org/a/gam/jijerp/v20y2023i3p1748-d1039425.html
   My bibliography  Save this article

Extrusion Effect or Promotion Effect? The Effect of Environmental Regulation on Enterprise Green Innovation

Author

Listed:
  • Wei Wang

    (Academy of Science and Technology Development, Journal Center, Huazhong Agricultural University, Wuhan 430000, China)

  • Hailin Chen

    (School of Economics and Trade, Guangdong University of Foreign Studies, Guangzhou 510006, China)

Abstract

This paper took the policy of China’ Air Pollution Prevention and Control Action Plan as an exogenous shock to reflect the change in environmental regulation intensity. By matching environmental policies with micro data of listed companies in China, this paper explored the effect and mechanisms of environmental regulation on enterprise green innovation. Through constructing difference-in-difference (DID) and difference-in-difference-in-difference (DDD) models, we found the following to be the case: (1) Environmental regulation had a significant positive effect with the green innovation level of Chinese listed companies. (2) Compared with non-regulated industries, this policy has led to a significant increase (5.4%) in the amount of firms’ green patent applications in regulated industries, and the promoting effect was more obvious in key areas that are strictly controlled by this policy. (3) Compared with non-state-owned enterprises, it had a stronger impact on the green innovation of state-owned enterprises. (4) Mechanistic analysis showed that China’s environmental regulation can play a resource compensation effect by increasing environmental protection subsidies for enterprises’ green innovation behaviors. Additionally, it can force firms to increase investment in environmental pollution governance by raising pollution penalties, thus exerting the forcing effect. This paper provides new evidence for Porter’s hypothesis and can provide a reference for developing countries promoting green innovation through environmental policies and regulations.

Suggested Citation

  • Wei Wang & Hailin Chen, 2023. "Extrusion Effect or Promotion Effect? The Effect of Environmental Regulation on Enterprise Green Innovation," IJERPH, MDPI, vol. 20(3), pages 1-18, January.
    • Handle: RePEc:gam:jijerp:v:20:y:2023:i:3:p:1748-:d:1039425
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1660-4601/20/3/1748/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/1660-4601/20/3/1748/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Daron Acemoglu & Philippe Aghion & Leonardo Bursztyn & David Hemous, 2012. "The Environment and Directed Technical Change," American Economic Review, American Economic Association, vol. 102(1), pages 131-166, February.
    2. Andreas Olden & Jarle Møen, 2022. "The triple difference estimator [Semiparametric difference-in-differences estimators]," The Econometrics Journal, Royal Economic Society, vol. 25(3), pages 531-553.
    3. Victor Ajayi & David Reiner, 2020. "European Industrial Energy Intensity: Innovation, Environmental Regulation, and Price Effects," The Energy Journal, , vol. 41(4), pages 105-128, July.
    4. Lovely, Mary & Popp, David, 2011. "Trade, technology, and the environment: Does access to technology promote environmental regulation?," Journal of Environmental Economics and Management, Elsevier, vol. 61(1), pages 16-35, January.
    5. Du, Kerui & Cheng, Yuanyuan & Yao, Xin, 2021. "Environmental regulation, green technology innovation, and industrial structure upgrading: The road to the green transformation of Chinese cities," Energy Economics, Elsevier, vol. 98(C).
    6. Stiglitz, Joseph E., 2015. "Leaders and followers: Perspectives on the Nordic model and the economics of innovation," Journal of Public Economics, Elsevier, vol. 127(C), pages 3-16.
    7. Giorgio Petroni & Barbara Bigliardi & Francesco Galati, 2019. "Rethinking the Porter Hypothesis: The Underappreciated Importance of Value Appropriation and Pollution Intensity," Review of Policy Research, Policy Studies Organization, vol. 36(1), pages 121-140, January.
    8. Ouyang, Xiaoling & Li, Qiong & Du, Kerui, 2020. "How does environmental regulation promote technological innovations in the industrial sector? Evidence from Chinese provincial panel data," Energy Policy, Elsevier, vol. 139(C).
    9. Xie, Rong-hui & Yuan, Yi-jun & Huang, Jing-jing, 2017. "Different Types of Environmental Regulations and Heterogeneous Influence on “Green” Productivity: Evidence from China," Ecological Economics, Elsevier, vol. 132(C), pages 104-112.
    10. Popp, David, 2006. "International innovation and diffusion of air pollution control technologies: the effects of NOX and SO2 regulation in the US, Japan, and Germany," Journal of Environmental Economics and Management, Elsevier, vol. 51(1), pages 46-71, January.
    11. Chiara Ravetti & Tania Theoduloz & Giulia Valacchi, 2020. "Buy Coal or Kick-Start Green Innovation? Energy Policies in an Open Economy," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 77(1), pages 95-126, September.
    12. Charles J. Hadlock & Joshua R. Pierce, 2010. "New Evidence on Measuring Financial Constraints: Moving Beyond the KZ Index," The Review of Financial Studies, Society for Financial Studies, vol. 23(5), pages 1909-1940.
    13. Barbieri, Nicolò, 2015. "Investigating the impacts of technological position and European environmental regulation on green automotive patent activity," Ecological Economics, Elsevier, vol. 117(C), pages 140-152.
    14. Hottenrott, Hanna & Rexhäuser, Sascha & Veugelers, Reinhilde, 2016. "Organisational change and the productivity effects of green technology adoption," Resource and Energy Economics, Elsevier, vol. 43(C), pages 172-194.
    15. Chakraborty, Pavel & Chatterjee, Chirantan, 2017. "Does environmental regulation indirectly induce upstream innovation? New evidence from India," Research Policy, Elsevier, vol. 46(5), pages 939-955.
    16. X. D. Xu & S. X. Zeng & H. L. Zou & Jonathan J. Shi, 2016. "The Impact of Corporate Environmental Violation on Shareholders' Wealth: a Perspective Taken from Media Coverage," Business Strategy and the Environment, Wiley Blackwell, vol. 25(2), pages 73-91, February.
    17. Bu, Maoliang & Qiao, Zhenzi & Liu, Beibei, 2020. "Voluntary environmental regulation and firm innovation in China," Economic Modelling, Elsevier, vol. 89(C), pages 10-18.
    18. Kneller, Richard & Manderson, Edward, 2012. "Environmental regulations and innovation activity in UK manufacturing industries," Resource and Energy Economics, Elsevier, vol. 34(2), pages 211-235.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Anqi Wang & Lianmei Zhu & Huanan Sun & Shali Wang & Haijing Ma, 2023. "Fiscal Decentralization, Enterprise Digital Transformation and Enterprise Green Innovation—The Case of 11 Years A-Share Listed Companies in China," Sustainability, MDPI, vol. 15(8), pages 1-21, April.
    2. Runbo Zhao & Huiying Zhang & Marina Yue Zhang & Fei Qu & Yunlong Xu, 2023. "Competitor-Weighted Centrality and Small-World Clusters in Competition Networks on Firms’ Innovation Ambidexterity: Evidence from the Wind Energy Industry," IJERPH, MDPI, vol. 20(4), pages 1-18, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Liu, Baoliu & Cifuentes-Faura, Javier & Ding, Chante Jian & Liu, Xiaoqian, 2023. "Toward carbon neutrality: How will environmental regulatory policies affect corporate green innovation?," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 1006-1020.
    2. Zhao, Ziyi & Zhao, Yuhuan & Lv, Xin & Li, Xiaoping & Zheng, Lu & Fan, Shunan & Zuo, Sumin, 2024. "Environmental regulation and green innovation: Does state ownership matter?," Energy Economics, Elsevier, vol. 136(C).
    3. Cai, Hechang & Wang, Zilong & Zhang, Zhiwen & Xu, Liuyang, 2023. "Does environmental regulation promote technology transfer? Evidence from a partially linear functional-coefficient panel model," Economic Modelling, Elsevier, vol. 124(C).
    4. Zhu, Xuehong & Zuo, Xuguang & Li, Hailing, 2021. "The dual effects of heterogeneous environmental regulation on the technological innovation of Chinese steel enterprises—Based on a high-dimensional fixed effects model," Ecological Economics, Elsevier, vol. 188(C).
    5. Zhou, Xiaoxiao & Jia, Mengyu & Wang, Lu & Sharma, Gagan Deep & Zhao, Xin & Ma, Xiaowei, 2022. "Modelling and simulation of a four-group evolutionary game model for green innovation stakeholders: Contextual evidence in lens of sustainable development," Renewable Energy, Elsevier, vol. 197(C), pages 500-517.
    6. De Xia & Wenhua Chen & Qinglu Gao & Rui Zhang & Yundong Zhang, 2021. "Research on Enterprises’ Intention to Adopt Green Technology Imposed by Environmental Regulations with Perspective of State Ownership," Sustainability, MDPI, vol. 13(3), pages 1-19, January.
    7. Xiaoxiao Zhou & Ming Xia & Teng Zhang & Juntao Du, 2020. "Energy- and Environment-Biased Technological Progress Induced by Different Types of Environmental Regulations in China," Sustainability, MDPI, vol. 12(18), pages 1-26, September.
    8. Hu, Hui & Qi, Shaozhou & Chen, Yuanzhi, 2023. "Using green technology for a better tomorrow: How enterprises and government utilize the carbon trading system and incentive policies," China Economic Review, Elsevier, vol. 78(C).
    9. Yanli Ji & Jie Xue & Kaiyang Zhong, 2022. "Does Environmental Regulation Promote Industrial Green Technology Progress? Empirical Evidence from China with a Heterogeneity Analysis," IJERPH, MDPI, vol. 19(1), pages 1-23, January.
    10. He, Yiqing & Ding, Xin & Yang, Chuchu, 2021. "Do environmental regulations and financial constraints stimulate corporate technological innovation? Evidence from China," Journal of Asian Economics, Elsevier, vol. 72(C).
    11. Qihang Xue & Caiquan Bai & Weiwei Xiao, 2022. "Fintech and corporate green technology innovation: Impacts and mechanisms," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(8), pages 3898-3914, December.
    12. Xianghua Yue & Shikuan Zhao & Xin Ding & Long Xin, 2022. "How the Pilot Low-Carbon City Policy Promotes Urban Green Innovation: Based on Temporal-Spatial Dual Perspectives," IJERPH, MDPI, vol. 20(1), pages 1-20, December.
    13. Huang, Jingchang & Zhao, Jing & Cao, June, 2021. "Environmental regulation and corporate R&D investment—evidence from a quasi-natural experiment," International Review of Economics & Finance, Elsevier, vol. 72(C), pages 154-174.
    14. Chuantang Ren & Tao Wang & Yue Wang & Yizhen Zhang & Luwei Wang, 2023. "The Heterogeneous Effects of Formal and Informal Environmental Regulation on Green Technology Innovation—An Empirical Study of 284 Cities in China," IJERPH, MDPI, vol. 20(2), pages 1-17, January.
    15. Huang, Youxing & Xu, Qi & Zhao, Yanping, 2021. "Short-run pain, long-run gain: Desulfurization investment and productivity," Energy Economics, Elsevier, vol. 102(C).
    16. Ma, Lina & Iqbal, Najaf & Bouri, Elie & Zhang, Yang, 2023. "How good is green finance for green innovation? Evidence from the Chinese high-carbon sector," Resources Policy, Elsevier, vol. 85(PB).
    17. Xie, Yu & Wu, Desheng & Li, Xiaoyan & Tian, Suhua, 2023. "How does environmental regulation affect productivity? The role of corporate compliance strategies," Economic Modelling, Elsevier, vol. 126(C).
    18. Liu, Duan & Yu, Nizhou & Wan, Hong, 2022. "Does water rights trading affect corporate investment? The role of resource allocation and risk mitigation channels," Economic Modelling, Elsevier, vol. 117(C).
    19. Lee, Chien-Chiang & Qin, Shuai & Li, Yaya, 2022. "Does industrial robot application promote green technology innovation in the manufacturing industry?," Technological Forecasting and Social Change, Elsevier, vol. 183(C).
    20. Qi, Xiulin & Wu, Zhifang & Xu, Jinqing & Shan, Biaoan, 2023. "Environmental justice and green innovation: A quasi-natural experiment based on the establishment of environmental courts in China," Ecological Economics, Elsevier, vol. 205(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jijerp:v:20:y:2023:i:3:p:1748-:d:1039425. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.