The “Local Neighborhood” Effect of Environmental Regulation on Green Innovation Efficiency: Evidence from China

Abstract

Current research has generally concentrated on the motivations of environmental policies on local green innovation while ignoring the effect they may have on green innovation in neighboring places. To obtain a thorough understanding and explanation of the influencing mechanism of environmental regulation (ER) on green innovation efficiency (GIE), the super-slack based measure-data envelopment analysis (Super-SBM-DEA) method was applied to evaluate Chinese provinces’ GIE, a spatial Durbin model was developed to evaluate the effect of ER on GIE from the perspective of the “local neighborhood” effect, and a mediating effect model was built to analyze the transmission mechanism of the neighborhood effect of ER on GIE. The study indicated that China’s regional GIE is high in the east and low in the west, with large spatial variability and significant positive spatial clustering characteristics. The effect of ER on local GIE is “U” shaped, while the influence on green innovation efficiency in neighboring areas is an inverted “U” shape. The influence of environmental regulation on GIE in neighboring areas is mainly achieved through the transfer of local polluting industries to neighboring areas. Based on the results, policy recommendations from the perspectives of choosing environmental regulation tools and transferring polluting industries are made to promote and realize the coordinated development of ER and green innovation.