Stringent environmental regulation and inconsistent green innovation behavior: Evidence from air pollution prevention and control action plan in China

Abstract

Air Pollution Prevention and Control Action Plan (APPCAP), which was introduced in 2013, had been hailed as the most stringent policy for air pollution control in China. In this paper, we evaluate the impact of APPCAP on the green innovation behavior of listed companies by adopting the difference-in-difference (DID) identification technique. And three innovation indicators (quantity, quality, and diversity) are constructed based on the green invention patent data in China during 2008–2017. We find that stricter emission reduction targets will induce listed companies to increase the applications for green inventions. Mechanism analysis further proves that financial resources are essential to promote green innovation under the pressure of air pollution control. And broadening financing channels as well as the support of government subsidies accompanied by the implementation of APPCAP would raise the enthusiasm of listed companies to invent. Specifically, state-owned companies and non-innovators, which are both sensitive to the government's decisions, are proven to be responsible for the rapid growth of green invention applications. Furthermore, we find that the companies' green innovation behavior is inconsistent. APPCAP will enhance the green innovation diversity, but does not improve the quality.