Regulation and innovation: Examining outcomes in Chinese pollution control policy areas |
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| Affiliation: | 1. Department of Economics, Boston University, 270 Bay State Road, Boston, MA 02215, USA;2. Department of Economics, Harvard University, 1805 Cambridge Street, Cambridge, MA 02138, USA;3. National Bureau of Economic Research, 1050 Massachusetts Avenue, Cambridge, MA 02138, USA;4. Harvard Business School, Soldiers Field, Boston, MA 02163, USA;1. University of Alcalá, Spain;2. University of Valladolid, Spain;1. European Commission, DG Joint Research Centre, Via Fermi 2749, I-21027, Ispra VA, Italy;2. Inter-American Development Bank, Calle 50 con Elvira Méndez, Tower Bank, Floor 23, Panama City, Panama;1. European University at St. Petersburg, 6/1A Gagarinskaya Str., St. Petersburg, 191187, Russia;2. Department of Economics, Feliciano School of Business, Montclair State University, Montclair, NJ, USA;1. University of Tunis, High Institute of Management, Tunis, Tunisia;2. College of Business Administration, AlBaha University, Saudi Arabia;3. Univ. Manouba, ESCT, RIM RAF, UR13ES56, Tunisia;4. University of Jeddah, College of Business, Department of Accounting, Jeddah, Saudi Arabia;5. University of Tunis, ISG, GEF-2A Lab, Tunis, Tunisia;6. University of Manouba, ESC, Manouba, Tunisia;1. Universidad Autónoma de Madrid, Spain;2. Universidad Complutense de Madrid, Spain;1. Department of Humanities and Social Sciences, Indian Institute of Technology Kharagpur, India;2. Indira Gandhi Institute of Development Research, Mumbai, India |
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| Abstract: | In this paper, we examine how two regionally implemented environmental initiatives in China have impacted the innovation ability of Chinese-listed firms. The regional implementation of these policies, with non-policy regions serving as controls, offers researchers the perfect conditions for a natural experiment. Using research and development (R&D) expenditures and patents as a proxy for innovativeness, we compare the record of innovation of firms inside the policy zones with firms outside the policy zones. We use a Difference-In-Difference-In-Differences (DIDID) method to eliminate endogeneity and take the quality of the patents into account by incorporating sub-items. Results show only one of the regulations had a positive effect and that low quality patents account for most of the innovation. We conclude that reasonably designed environmental regulations, when implemented regionally in competitive industries, do improve Chinese firms' innovation ability in line with the Porter Hypothesis. The results help us derive some useful policy implications regarding innovation. |
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| Keywords: | Environmental regulations Innovation Porter hypothesis Difference-in-difference-in-differences estimation Q52 Q58 O32 |
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