THE IMPACT OF HETEROGENEOUS ENVIRONMENTAL REGULATION ON FIRMS’ GREEN INNOVATION: EMPIRICAL EVIDENCE FROM CHINA’S MANUFACTURING INDUSTRY

Abstract

Green innovation is an essential support to realise sustainable development, while environmental regulation is an influential factor affecting green innovation, and different types of environmental regulation will have differentiated impacts on corporate green innovation. The aim of this paper is to shed light on the relationship between environmental regulation and green innovation and to explore mechanisms based on the institutional theory. Chinese manufacturing enterprises were selected as the study sample and empirically analysed using a multilayer linear regression model. The results show that command-and-control, market-incentive and voluntary environmental regulations all significantly and positively affect firms’ green innovation, but voluntary environmental regulations are more effective; the level of digitalisation technology and the scope of digitalisation application are both conducive to firms’ green innovation and play a partially mediating role between environmental regulations and green innovation. Based on these findings, this paper discusses the implications of regulation and provides an outlook for future research directions.