Climbing the quality ladder of green innovation: Does green finance matter?

Hongyun Huang, William Mbanyele, Fengrong Wang, Malin Song and Yuzhang Wang

Technological Forecasting and Social Change, 2022, vol. 184, issue C

Abstract: As the second-largest economy in the world with both high-energy consumption and high‑carbon emission, China has launched several green finance pilot zones (GFPZ) targeting regional sustainable development goals (SDGs). Despite critical policy significance, whether and how green finance affects green innovation by enterprises still remains not well understood. Hence, using a difference-in-difference identification strategy and a micro-sample of A-share Chinese listed enterprises during 2007–2019, we investigated the aggregate casual effects of the GFPZ policy on green innovation quality. The empirical results show that the GFPZ policy has incentive and restraint effects on the enterprises' green innovation behavior. It substantially restricts enterprises from engaging in low-quality green innovation and encourages them to spur high-quality ones in the long run. Furthermore, we explore three plausible channels that may explain this beneficial effect; mitigating financial constraints, reducing transaction costs and intensifying peer-to-peer competition in research and development (R&D). In addition, this effect is more pronounced for sub-samples of high-polluting industries, non-state-owned enterprises, and small, medium and micro enterprises. We further show that high-quality green innovation is a plausible mechanism that links green finance with regional green development through enhancing green productivity growth. Overall, these findings provide new insights into the real effects of green finance on green innovation and productivity growth in the context of SDGs.

Keywords: Green finance; Green innovation quality; Financial constraints; Transaction costs; R&D competition; Green productivity growth (search for similar items in EconPapers)
JEL-codes: G21 G32 O16 Q01 Q55 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (33)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:tefoso:v:184:y:2022:i:c:s0040162522005285

DOI: 10.1016/j.techfore.2022.122007

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