How does environmental regulation affect the sectoral and spatial effects of corporate energy technology innovation spillovers? Evidence from urban clusters in China

Dongyang Zhang and Dingchuan Bai

International Review of Financial Analysis, 2025, vol. 106, issue C

Abstract: The critical question of whether environmental regulation instruments designed to address ecological market failures can effectively facilitate enable spillover effects in corporate energy technology innovation holds significant value for transforming China's energy industry development model, establishing a low-carbon and secure energy system, and advancing green development. Utilizing panel data from Chinese listed firms between 2011 and 2019, this study investigates the mechanisms through which environmental regulation influences energy innovation spillovers. Furthermore, it examines the heterogeneity of these spillover effects across urban clusters by analyzing peer and spatial multidimensions. In doing so, we unearth several key findings. There is a significant “inverted U” effect of environmental regulation on energy innovation spillovers from peer firms, with notable heterogeneity across firms in terms of technology level and ownership type. Firms’ digital transformation significantly mitigates the suppressive effect of environmental regulation on energy innovation spillovers across peer firms. Under the perspective of urban clusters, the Jing-Jin-Ji, the Yangtze River Delta and the middle reaches of Yangtze River urban clusters show “inverted U” peer spillover effects; the Pearl River Delta urban cluster shows negative effects; the Central Plains urban cluster shows “U” shapes; and the Cheng-Yu and the Ha-Chang urban clusters do not have significant spillover effects. Notably, the results of spatial and sectoral spillover effects of environmental regulation on firms' energy innovation are highly consistent in the Jing-Jin-Ji and the Yangtze River Delta urban clusters. These findings not only contribute to enhance the quality and efficiency of China's environmental regulation policies, but also offer significant policy implications for promoting corporate green and low-carbon transformation, thereby facilitating the achievement of the “dual-carbon” strategic objectives.

Keywords: Urban clusters; Environmental regulation; Energy technology innovation; Sectoral spillovers; Spatial spillovers (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:106:y:2025:i:c:s1057521925006519

DOI: 10.1016/j.irfa.2025.104564

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