Abstract
Using a dataset of Chinese private firms from 2002 to 2014, this study examines the impact of China’s SO2 emission trading schema pilot on industrial innovation. In particular, this study explores the moderating effects of institutional settings from the perspective of new structural economics. Our finding shows positive support for the Porter Hypothesis (Porter and Linde, 1995), demonstrating that institutional regulation may enhance its impact on industrial innovation. Furthermore, both regulatory system and regulation enforcement may positively moderate the policy effect of emission trading schema on industrial innovation. Our findings indicate that market-oriented environmental regulation should be enforced in the aid of institutional settings.
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