Energy price and cost induced innovation: Evidence from China

Dongmin Kong, Xiandong Yang and Jian Xu

Energy, 2020, vol. 192, issue C

Abstract: This study investigates the effect of energy price on firm’s innovation in China. Energy is important input factor in manufacturing firms and significantly affecting firm’s operation cost, but we scarcely know its effects on firm innovation. While the increase of energy price may reduce R&D investment and innovation by undermining firm profits, the high input cost may call for active responses of firms to energy-saving efforts, which will eventually enhance firm innovation. We present the following evidence on the basis of listed firms in China’s manufacturing industry: 1) Energy price significantly raises firm’s innovation as measured by patents at the firm level, which support the induced innovation hypothesis. 2) Path analysis indicates that the underlying channel is operation cost and manager’s career concern. Specifically, rising energy price increases operating costs and the prospects of manager’s career concern, which, in turn, encourage firms to innovate. 3) Our findings are particularly pronounced in firms where the rising energy shock may bring more cost pressures, and firms where CEOs have more career concerns. Overall, this study provides timely evidence and important policy implications for the ongoing debates on energy saving worldwide.

Keywords: Energy price; Firm innovation; Induced innovation hypothesis; China (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (47)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0360544219322819
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:192:y:2020:i:c:s0360544219322819

DOI: 10.1016/j.energy.2019.116586

Access Statistics for this article

Energy is currently edited by Henrik Lund and Mark J. Kaiser

More articles in Energy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().