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Examining the Impact of China’s New Environmental Protection Law on Enterprise Productivity and Sustainable Development

Author

Listed:
  • Kai Qu

    (Yulin University
    Policy Institute of XiXian New Area)

  • Yapeng Zhang

    (Yulin University)

  • Yinling Liu

    (Yulin University)

  • Tao Feng

    (Policy Institute of XiXian New Area)

Abstract

The paper delves into the interplay between environmental regulations, technological advancement, and enterprise productivity in China’s evolving economic landscape. Against the backdrop of escalating environmental pollution and its adverse economic consequences, this study highlights the urgent need to balance economic growth and ecological well-being. The paper critically evaluates the multifaceted challenges posed by environmental degradation, acknowledging its toll on GDP and societal welfare. In a comprehensive exploration, the study leverages A-share listed industrial enterprises’ data from 2012 to 2017 to investigate the ramifications of China’s new Environmental Protection Law. Utilizing the Difference-in-Differences methodology, the research uncovers a nuanced relationship between the law’s implementation and enterprise total factor productivity (TFP). Initial findings indicate a short-term inhibitory effect on TFP, which gradually attenuates over time, reflecting a nonlinear impact of environmental regulations on enterprise performance. The paper unravels three mechanisms through which the law influences TFP: constraining technology Research and Development (R&D) input, impacting enterprise fixed investment and government subsidies, and mediating through government subsidies to shape enterprise R&D input and TFP. By dissecting these mechanisms, the study advances our understanding of how environmental governance, enterprise behavior, and technological innovation influence productivity outcomes. Theoretical implications underscore the need for a sophisticated and context-sensitive approach to policy evaluation, enriching the discourse on the intricate relationships between environmental regulations, technological innovation, and economic outcomes. Moreover, the paper offers valuable managerial insights, emphasizing the importance of strategic management of R&D investment, fixed asset allocation, and reliance on government subsidies in the face of evolving regulatory frameworks.

Suggested Citation

  • Kai Qu & Yapeng Zhang & Yinling Liu & Tao Feng, 2024. "Examining the Impact of China’s New Environmental Protection Law on Enterprise Productivity and Sustainable Development," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(3), pages 10722-10747, September.
    • Handle: RePEc:spr:jknowl:v:15:y:2024:i:3:d:10.1007_s13132-023-01500-9
    DOI: 10.1007/s13132-023-01500-9
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