Neighbourhood or beggar-thy-neighbour: the spatial effect of regional green credit development on green technology innovation

Abstract

Green credit is an innovative financial instrument that aims to promote environmentally friendly innovations. However, financial institutions, as carriers of green credit, exhibit noticeable regional differences in the effects of implementation, leading to disparities in the distribution of green credit across regions, which will have a differentiated impact on inter-regional innovation. Unfortunately, the existing literature overlooks the impact of inter-regional differences in green credit distribution on technological innovation. Therefore, this study utilized panel data from 30 provinces and cities in China from 2012 to 2021, and adopted the spatial Durbin model to study the impact of regional differences in green credit development on green technology innovation. Additionally, this paper explores the moderating effect of green credit on the spatial impact of green innovation from the perspectives of environmental regulation and digital finance. The results of this paper indicate that the development of green credit promotes green technology innovation at the local level but has a negative impact on neighboring regions. And the negative spatial spillover effect is more significant in the central and western regions and polluting industries. Through mechanism testing, this study finds that the negative spatial spillover effect on green technology innovation is primarily driven by the migration of polluting industries across regions and the turnover of green technology R&D staff in response to the pressure of green credit. Furthermore, this paper finds that marketization and public participation in environmental regulation, as well as the presence of digital finance, significantly enhance the promotion of local green technology innovation and mitigate the negative spatial spillover effect. This study provides valuable insights for the Chinese government in implementing a regional linkage strategy for green credit within the context of the green economy transition.