Impact of environmental regulations on the innovation of SMEs: Evidence from China

Abstract

Government regulation may bring about positive or negative effects on enterprise innovation. Based on the perspective of government regulation theory, this study builds a theoretical model to demonstrate the role of environmental regulation (intellectual property protection and social responsibility supervision) in improving the innovation performance of small and medium-sized enterprises (SMEs). Empirical tests are carried out using 457 SMEs in China as the sample. The results show that (1) intellectual property rights (IPR) protection and corporate social responsibility (CSR) supervision can significantly promote the improvement of enterprise innovation performance. (2) Enterprise IPR protection and CSR supervision can significantly promote enterprise innovation motivation, and innovation motivation plays a partial intermediary role in the relationship between IPR protection and enterprise innovation performance as well as that between CSR supervision and enterprise innovation performance. (3) Environmental turbulence positively moderates the relationship between IPR protection and enterprise innovation performance as well as that between CSR supervision and enterprise innovation performance. This study enriches the current knowledge on the government regulation theory’s role in enterprise innovation and has practical implications for improving the innovation performance of SMEs. • Role of environmental regulation in improving SMEs’ performance is demonstrated. • IPR protection and CSR supervision significantly promote innovation performance. • Environmental turbulence moderates IPR protection and innovation performance’s link. • It also moderates CSR supervision and innovation performance’s link.