Impact of Environmental Regulation on Regional Innovative Ability: From the Perspective of Local Government Competition

Abstract

We empirically investigate the relationship between environmental regulation and regional innovative ability from the perspective of government competition with a dynamic spatial model, using the 2011–2020 Chinese interprovincial panel dataset as the sample. Empirical underpinnings reveal the interconnection between environmental regulation and regional innovative ability. Further, it has been substantiated as follows: (1) environmental regulation affects regional innovative ability significantly. From the national level perspective, environmental regulation is negatively correlated with regional innovative ability. Further, vigorous environmental regulation deters regional innovative ability and produces a crowding out effect; (2) Environmental regulation has a significant spatial spillover effect on regional technological innovative ability. Meanwhile, the promulgation of environmental policy in the region will affect the innovative ability of neighboring regions; (3) It has also been concluded that there is a strategic competition among local governments in promulgation of environmental regulation, specifically in eastern and central regions which has been signified through regional regressions result. Comprehensively, the current study provides recommendations to governments for allocation of environmental policy under the aegis of regional innovation for improving regional innovative ability.