Administrative monopoly regulation and environmental innovation: An analysis based on China's asymmetric market structure

Abstract

To better understand the role of the competitive environment for firm innovation, this study takes China's Fair Competition Review System as an example to explore the impact of administrative monopoly regulation on environmental innovation. By utilizing China's market Structure, the study devises a quasi-natural experiment. It employs the DID method to assess the causal relationship between administrative monopoly regulation and the firm's environmental innovation. The findings indicate that implementing the Fair Competition Review System induces a marked reduction in environmental innovation by firms in the administrative monopoly sector, suggesting a substantial inhibition effect of the policy.Further research shows that this inhibition effect primarily manifests in the short term. Breaking administrative monopoly and optimizing the market environment wield the potential to increase firm environmental innovation in the long term. Evidence from the mechanism analysis highlights the critical roles played by factors such as industry competition, industry environmental uncertainty, R&D investments, financial constraints, and government subsidies in driving this process.