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How does environmental regulation affect firm innovation? Evidence based on corporate life cycle

Hao, Miao and Lyv, Kangjuan and Li, Shiyuan and Hu, Wuyang (2021): How does environmental regulation affect firm innovation? Evidence based on corporate life cycle.

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Abstract

Environmental regulation can be an effective tool for the government to balance the relationship between the ecology and economic development. In this paper, the corporate life cycle theory is incorporated into environmental regulation policy evaluation, and the impact of environmental regulation on the output of innovation by China’s enterprises in different development stages is analyzed. The results show that environmental regulation significantly promotes innovation and particularly green innovation of all enterprises in China. The effect is especially strong for enterprises in the start-up and growing stage, and the impetus for innovation among private enterprises is significantly greater than that of state-owned enterprises. The mechanism behind these results is also analyzed. This paper extends the existing theoretical framework and provides empirical reference for future environmental policy research. Also, we provide guidance for the government to formulate environmental policies according to the development tasks of different stages and the nature of different enterprises, so as to achieve the social and economic goals effectively.

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