Do Environmental Regulations Promote or Inhibit Cities’ Innovation Capacity? Evidence from China

Xiaowen Zeng, Ming Jin and Shuang Pan ()
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Xiaowen Zeng: The Faculty of Economics, Guangdong University of Finance & Economics, Guangzhou 510320, China
Ming Jin: School of Economics, Zhejiang University of Finance and Economics, Hangzhou 310018, China
Shuang Pan: School of Accountancy, Jiangxi University of Finance and Economics, Nanchang 330013, China

IJERPH, 2022, vol. 19, issue 24, 1-21

Abstract: The “Porter Hypothesis” proposes that appropriate environmental regulations would promote firm innovation. This study aims to build a theoretical model for illustrating the impact and mechanism of environmental regulation on urban innovation through a panel of 281 Chinese prefecture-level cities during 2003–2016. The results indicated that an increase in environmental regulation markedly suppressed the innovative capacity of Chinese cities during the sample period. This inhibitory effect is primarily transmitted through two mediating variables: lower regional fiscal revenue and reduced manufacturing output. Moreover, improved regional economic development level helps generate positive incentives for environmental regulation and mitigate its inhibitions to innovation. Environmental regulation and urban innovation might have a non-linear U-shape relation, with the former helping improve urban innovation capacity upon reaching a particular level.

Keywords: environmental regulation; urban innovation; mediating effect (search for similar items in EconPapers)
JEL-codes: I I1 I3 Q Q5 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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