Abstract
In China, the environmental governance patterns of local governments differ significantly. This study explores the possible relationship between environmental governance patterns and firm's technological innovation. It firstly develops a quantitative method to describe environmental governance patterns by decomposing the environmental regulation intensity index into Normalized Governance Index (NGI) and Passive Governance Index (PGI). Then, this study employs Chinese city-level datasets in 2011–2015 to estimate High-Dimensional Fixed Effect model with instrumental variable (IV). The results show that, first, environmental regulations of governments positively affect technological innovation. Second, NGI has a positive moderating effect on the relationship between environmental regulation and technological innovation, whereas PGI has a negative moderating effect. Third, two opposite forces induced by governance patterns can explain the inverted U-shaped Porter effect. The results suggest energy, environmental, and technological innovation policy implications, as stable and expectable environmental regulation can better promote industrial sector technological innovation given the Porter effect.
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