Environmental Regulation and Green Technology Innovation: Evidence from China’s Heavily Polluting Companies

Abstract

The green transformation of heavily polluting companies is essential for sustainable development. This study investigated the direct effects of environmental regulation on two types of green technology innovations at the microlevel and explored the moderating effects of three levels of firm supervision—government, public, and internal. Analyzing a panel of China’s heavily polluting companies during 2011–2020, we find that environmental regulation inhibits both types of green technology innovation. However, the degree of such inhibition varies with different moderators. Specifically, lower environmental pressure and better internal corporate controls can weaken or even reverse the inhibition of green invention innovation, while higher media attention can weaken the inhibition of green utility-model innovation. Our findings thus extend the literature on the scenarios of environmental regulation by revealing the heterogeneous moderating effects of government-, public-, and firm-level factors on two types of green innovation. Moreover, our findings have practical implications for promoting the green transformation of heavily polluting companies.