Abstract
Previous literature has shown that manufacturers’ choices between radical and incremental green innovation modes can greatly impact the tradeoff between industry growth and carbon emission reduction. Yet, how the government can motivate manufacturers to implement radical green innovations to reduce carbon emission is unclear. In this paper, the researchers construct an evolutionary game model to analyze the joint impacts of carbon tax and innovation subsidy on manufacturers’ choices of green innovation mode. We derive the conditions for manufacturers’ stable strategies. Based on those results, we find that four factors—carbon tax, innovation subsidy, consumer green preference, and manufacturers’ capabilities of absorbing and adopting new technologies—may facilitate the choice of radical innovation. Furthermore, we conduct numerical simulations to verify the theoretical results, and further illustrate how the synergy of carbon tax rate and subsidy level affects the evolution of the green innovation mode choices. Specifically, we demonstrate the superiority of portfolio policy in the early stage of green innovation over single policy. In contrast, in the later stage, it is carbon tax but not innovation subsidy that remains effective. We discuss the insights for the government to formulate appropriate environmental policies to effectively promote the adoption of green innovation and reduce carbon emission.
Highlights
In the past few decades, excessive carbon emission and the consequent climate change have become major concerns around the world [1]
Only when the minimum additional net profit obtained by enterprises through radical green innovation is positive, the enterprise group will evolve to the “ideal state” of choosing a radical green innovation mode
We demonstrate that carbon the “ideal state” of choosing a radical green innovation mode
Summary
In the past few decades, excessive carbon emission and the consequent climate change have become major concerns around the world [1]. The high risk of significant R&D costs, knowledge spillover, and the positive externality of green innovations are all likely to result in manufacturers’ hesitation toward developing and adopting radical green innovations [18] As a result, these manufacturers will, at most, implement incremental innovations, such as green packaging for their products. As some empirical research has found that a manufacturer’s choice of green innovation mode is affected by various internal and external factors [19], the government may guide and encourage manufacturers to choose radical innovations through policy tools beyond imposing pressure. This paper contributes to the literature by adopting an evolutionary game theory approach This approach allows researchers to model dynamic changes in the environment rather than static ones while taking into account the bounded rationality of decision makers and information asymmetry.
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