How Do Chinese Exporting Firms Respond to Environment‐related Notifications? A Green Innovation Perspective

Wen Chen and Yinzi Fan

China & World Economy, 2024, vol. 32, issue 5, 1-27

Abstract: Environment‐related notifications play an important role in the coordinated development of trade and environment protection. In this paper, we examine how Chinese exporting enterprises responded to environment‐related notifications implemented by the US through green innovation practices. These notifications significantly encouraged exporting firms to increase green innovation, as evidenced particularly by the number of green utility model patents granted. This effect was most pronounced in non‐foreign‐invested enterprises, high‐total‐factor‐productivity firms, technology‐intensive industries, and nongreen industries. These notifications also increased the probability of enterprises exiting the market while reducing the probability of new enterprises entering it. The innovation motivation of surviving firms was higher than that of the new entrants. Our analysis also suggests that environment‐related notifications had a crowding‐out effect on other innovation rather than a leverage effect. This study offers important empirical evidence that helps enterprises to respond to green non‐tariff measures effectively, enrich the existing literature, and provide practical guidance for both policymaking and corporate development.

Date: 2024
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