Local-neighborhood effects of environmental regulations on green technology innovation in manufacturing: Green credit-based regulation

Abstract

With the deterioration of environmental pollution, resource security and climate crisis, transforming the mode of economic development and developing a green economy have turned into an international consensus. However, environmental regulations (ERs) can help facilitate technological innovation. As an important financial support for the green innovation transformation of China’s manufacturing industry, it is crucial to exploit the policy synergy between green credit (GC) and ERs at the regional level to stimulate technological innovation effects. GC, as a financial instrument, can play a unique role in ERs; therefore, the relationship between ERs and the level of green technology innovation (GTI) based on the GC perspective deserves an in-depth study. Using a spatial Durbin model (SDM) for the panel data of 30 Chinese provinces from 2006 to 2016, this paper explores the spatial effects of ERs and GC on GTI in manufacturing and the moderating effects of GC policies on ERs affecting GTI. The research finds that ERs exert a negative impact on local manufacturing GTIs and undermine the innovation effect in neighboring locations through spatial spillover effects. The development of GC helps stimulate the transformation of GTI in local manufacturing industries with further attention on the effects of policy instruments and their combinations. The moderating effect of GC suggests that its development can weaken the inhibiting effect of ERs on GTI in local and neighboring areas and is particularly significant in coastal areas. Our study provides a theoretical basis and policy insights for coordinating government external intervention and market operation laws at the regional level to bring into play the incentive effect of technological innovation.