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Local governments’ cross-regional holdings and green innovation: Evidence from China

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  • Qiu, Baoyin
  • Sun, Zhenzhen
  • Zhang, Guiqiao

Abstract

Drawing on local officials’ promotion tournament theory, we examine the impact of local governments’ cross-regional holdings on the green innovation of local, state-owned enterprises at the micro level. Taking a sample of Chinese local, state-owned listed companies from 2008–2023, we find that cross-regional holdings by local governments reduce green innovation among local, state-owned enterprises. Compared with enterprises in local, government-held jurisdictions, cross-regional holdings reduce the green innovation of cross-regionally held enterprises by 15% through cuts to their environmental subsidies and increased agency costs. Further analyses reveal that the dampening effect of cross-regional holdings on green innovation is more pronounced in regions with stringent environmental regulations; among nonheavily polluting industries; and among local, state-owned enterprises based in nonprovincial capitals and central municipalities. Our paper offers a political economy explanation for why local, state-owned enterprises under cross-regional holdings exhibit less green innovation in an authoritarian context characterized by tournament-style political competition.

Suggested Citation

  • Qiu, Baoyin & Sun, Zhenzhen & Zhang, Guiqiao, 2026. "Local governments’ cross-regional holdings and green innovation: Evidence from China," Economic Analysis and Policy, Elsevier, vol. 93(C), pages 565-581.
    • Handle: RePEc:eee:ecanpo:v:93:y:2026:i:c:p:565-581
    DOI: 10.1016/j.eap.2026.07.022
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