Abstract
With heavy air pollution and the highest CO2 emissions in the world, China is in urgent need of technology innovation to improve the energy efficiency and control the pollution emission. This study empirically investigates the impact of environmental regulation intensity, political connections, and business connections on green technology innovation in China’s firms. The authors employ a panel data regression analysis on a dataset that comprises 884 observations for A-share listed companies from 2016 to 2019, owing to the availability of data. The results show: (1) Environmental regulation intensity (ERI) has a U-shaped effect on green technology innovation (GTI), which means GTI is inhibited by ERI in the early stage but gets promoted in the long run; (2) Political connections positively moderate the relationship between ERI and GTI mainly because of crowding-out effect and resource effect; (3) Business connections have a negative impact on the relationship between ERI and GTI, resulting from knowledge acquisition and lock-in; (4) Business connections have a greater moderating effect than political connections probably because political ties lack an effective mechanism to ensure long-term cooperation with the enterprises; (5) However, with regard to those firms in the non-heavily polluting industry, both connections moderate the relationship between ERI and GTI in an opposite direction to the main effect. The research results help policy makers formulate relevant policies, based on the impact of environmental regulation and social connections on green technology innovation.
Highlights
As the world’s second largest economy, has made remarkable achievements in economic growth over the past 4 decades, but its long-term extensive economic development model has resulted in a serious waste of energies and environmental pollution
The results suggest that political connection positively moderates the U-shaped relationship between environmental regulation and green technology innovation (GTI)
The following assumption is developed: Hypothesis 2 (H2): Political connections positively moderate the relationship between environmental regulation intensity and GTI
Summary
Publisher’s Note: MDPI stays neutral with regard to jurisdictional claims in published maps and institutional affiliations. On 22 September 2020, President Xi Jinping made an announcement at the United Nations General Assembly that China strives to reach a peak of carbon emission by 2030 and achieve carbon neutrality before 2060, which means China’s environmental governance will be more stringent in order to achieve the goal of the Nationally Determined Contributions It has been controversial in academic circles whether strict environmental regulation can change a firm’s behavior and effectively promote green technology innovation (GTI). Neoclassical economic theory holds that environmental regulation can improve the overall social benefits, but with rising pollution control costs, it has a crowding-out effect on enterprise production and innovation investment, inhibiting green technological innovation and decreasing the competitive advantage of enterprises in the international trade [15,16] Under this scenario, wealthy countries with strong environmental regulations tend to offshore their polluting industries to developing countries, which results in the “Pollution Haven Effect” [17,18,19].
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