 The masking effect of green innovation: A study based on carbon market shocksXiaoping He and Wenbo Dai Energy Economics, 2025, vol. 141, issue C Abstract: Previous empirical evidence indicates that the carbon market exerts a positive influence on the performance of corporate green innovation. In light of the proposition that there are differences in the green innovation capabilities of firms, we propose a masking effect hypothesis which suggests that the carbon market does, in fact, improve firms' green innovation performance at the overall level. However, separately, this improvement effect is only observed for high-capability firms, and not for ordinary firms. We test the hypothesis and explore the potential mechanism. The results show that, firstly, the outstanding green innovation performance of high-capability firms leads to a masking effect, which is robust to different estimation methods and variable settings. Secondly, the high innovation capability increases the positive effect of the carbon market on green innovation, irrespective of whether the capability is brown or green, which means a weak version of the masking effect. Finally, the different propensities towards co-innovation lead to the masking effect. Keywords: Masking effect; Green innovation capability; Carbon market pilots; Path dependency; Complementation effect (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:141:y:2025:i:c:s0140988324007448 DOI: 10.1016/j.eneco.2024.108035 Access Statistics for this article Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant More articles in Energy Economics from Elsevier |
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