IDEAS home Printed from https://ideas.repec.org/a/eee/finlet/v71y2025ics1544612324014703.html

Business environment optimization and corporate sustainable innovation: Evidence from China

Author

Listed:
  • Liang, Zhanyong
  • Qiu, Kangquan
  • Zhuang, Jiakun
  • Zhang, Qingyang

Abstract

Based on our analysis of samples of Chinese A-share listed companies from 2013 to 2021, we find that optimizing the urban business environment significantly promotes corporate sustainable innovation. This finding remains unchanged after a series of robustness tests. The mechanism analysis shows that business environment optimization improves corporate sustainable innovation by reducing perception of uncertainty, alleviating financial constraints and attracting innovative talent. The heterogeneity analysis further demonstrates that the effect is more pronounced in non-state-owned, large and high-tech companies. This article enriches the research on the influencing factors of corporate sustainable innovation and the economic impacts of business environment optimization.

Suggested Citation

  • Liang, Zhanyong & Qiu, Kangquan & Zhuang, Jiakun & Zhang, Qingyang, 2025. "Business environment optimization and corporate sustainable innovation: Evidence from China," Finance Research Letters, Elsevier, vol. 71(C).
    • Handle: RePEc:eee:finlet:v:71:y:2025:i:c:s1544612324014703
    DOI: 10.1016/j.frl.2024.106441
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1544612324014703
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.frl.2024.106441?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Haidar, Jamal Ibrahim, 2012. "The impact of business regulatory reforms on economic growth," Journal of the Japanese and International Economies, Elsevier, vol. 26(3), pages 285-307.
    2. Xuemeng Guo & Ke Guo & Hanzhong Zheng, 2023. "Industrial Agglomeration and Enterprise Innovation Sustainability: Empirical Evidence from the Chinese A-Share Market," Sustainability, MDPI, vol. 15(15), pages 1-26, July.
    3. Ding, Na & Gu, Leilei & Peng, Yuchao, 2022. "Fintech, financial constraints and innovation: Evidence from China," Journal of Corporate Finance, Elsevier, vol. 73(C).
    4. Triguero, Ángela & Córcoles, David, 2013. "Understanding innovation: An analysis of persistence for Spanish manufacturing firms," Research Policy, Elsevier, vol. 42(2), pages 340-352.
    5. Luo, Yonggen & Cui, Huijie & Zhong, Huiyi & Wei, Changhua, 2023. "Business environment and enterprise digital transformation," Finance Research Letters, Elsevier, vol. 57(C).
    6. Bettina Peters, 2009. "Persistence of innovation: stylised facts and panel data evidence," The Journal of Technology Transfer, Springer, vol. 34(2), pages 226-243, April.
    7. Barbara Sianesi & John Van Reenen, 2003. "The Returns to Education: Macroeconomics," Journal of Economic Surveys, Wiley Blackwell, vol. 17(2), pages 157-200, April.
    8. Suárez, Diana, 2014. "Persistence of innovation in unstable environments: Continuity and change in the firm's innovative behavior," Research Policy, Elsevier, vol. 43(4), pages 726-736.
    9. Li, Juncheng & Qin, Xiuting & Tang, Jian & Yang, Lu, 2022. "Foreign trade and innovation sustainability: Evidence from China," Journal of Asian Economics, Elsevier, vol. 81(C).
    10. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
    11. Chen, Zehao & Li, Yibo & Lin, Yuyang & Pan, Jingrui, 2023. "Business environment and corporate financing decisions: From the perspective of dynamic adjustment of capital structure," Finance Research Letters, Elsevier, vol. 58(PB).
    12. Arthur Lewbel, 1997. "Constructing Instruments for Regressions with Measurement Error when no Additional Data are Available, with an Application to Patents and R&D," Econometrica, Econometric Society, vol. 65(5), pages 1201-1214, September.
    13. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
    14. Yi Chen & Ziying Fan & Xiaomin Gu & Li-An Zhou, 2020. "Arrival of Young Talent: The Send-Down Movement and Rural Education in China," American Economic Review, American Economic Association, vol. 110(11), pages 3393-3430, November.
    15. Toni M. Whited & Guojun Wu, 2006. "Financial Constraints Risk," The Review of Financial Studies, Society for Financial Studies, vol. 19(2), pages 531-559.
    16. Adrian Corcoran & Robert Gillanders, 2015. "Foreign direct investment and the ease of doing business," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 151(1), pages 103-126, February.
    17. Yang, Siying & Wang, Wenzhi & Ding, Tao, 2023. "Intelligent transformation and sustainable innovation capability: Evidence from China," Finance Research Letters, Elsevier, vol. 55(PB).
    18. Yian Chen, 2022. "Misallocation of Talent and Innovation: evidence from China," Applied Economics, Taylor & Francis Journals, vol. 54(14), pages 1598-1624, March.
    19. Huseyin Gulen & Mihai Ion, 2016. "Editor's Choice Policy Uncertainty and Corporate Investment," The Review of Financial Studies, Society for Financial Studies, vol. 29(3), pages 523-564.
    20. Demirguc-Kunt, Asli & Love, Inessa & Maksimovic, Vojislav, 2006. "Business environment and the incorporation decision," Journal of Banking & Finance, Elsevier, vol. 30(11), pages 2967-2993, November.
    21. David Doloreux & Steve Dionne, 2008. "Is regional innovation system development possible in peripheral regions? Some evidence from the case of La Pocatière, Canada," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 20(3), pages 259-283, May.
    22. Ganter, Alois & Hecker, Achim, 2013. "Persistence of innovation: Discriminating between types of innovation and sources of state dependence," Research Policy, Elsevier, vol. 42(8), pages 1431-1445.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wang, Shuo & Huang, Deming, 2025. "Competition policy and corporate governance: A quasi-natural experiment based on the implementation of the Anti-Monopoly Law," Finance Research Letters, Elsevier, vol. 81(C).
    2. Wang, Sinuo & Wei, Chu, 2026. "How certification programs boost SME productivity: Evidence from China’s targeted industrial policy," Structural Change and Economic Dynamics, Elsevier, vol. 76(C), pages 152-170.
    3. Chen, Xiaoyu & Luo, Qi, 2026. "Common institutional ownership and sustainable innovation," Finance Research Letters, Elsevier, vol. 88(C).
    4. Dun, Shiyu, 2026. "Business environment and industrial chain: Evidence from a quasi-natural experiment in China," Finance Research Letters, Elsevier, vol. 92(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Marta F. Arroyabe & Martin Schumann, 2022. "On the Estimation of True State Dependence in the Persistence of Innovation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 84(4), pages 850-893, August.
    2. Yang, Tianjian & Qian, Peng & Lei, Tianyi, 2025. "Does ease of doing business promote renewable energy development? Evidence from 162 economies," Journal of Asian Economics, Elsevier, vol. 97(C).
    3. Capolupo, Rosa, 2009. "The New Growth Theories and Their Empirics after Twenty Years," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy, vol. 3, pages 1-72.
    4. Agnieszka Gehringer & Inmaculada Martinez-Zarzoso & Felicitas Nowak.Lehmann Danziger, 2013. "The Determinants of Total Factor Productivity in the EU: Insights from Sectoral Data and Common Dynamic Processes," EcoMod2013 5343, EcoMod.
    5. Maria Jesus Herrerias & Vicente Orts, 2011. "The driving forces behind China’s growth," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 19(1), pages 79-124, January.
    6. Cristiano Antonelli & Francesco Crespi & Giuseppe Scellato, 2018. "Productivity growth persistence: firm strategies, size and system properties," Chapters, in: The Evolutionary Complexity of Endogenous Innovation, chapter 8, pages 176-202, Edward Elgar Publishing.
    7. Wan, Qin & Pan, Hongyu & Huang, Jinbo, 2024. "Can improving the business environment narrow the within-firm pay gap? Evidence from data on 233 Chinese cities," Pacific-Basin Finance Journal, Elsevier, vol. 88(C).
    8. Dario Guarascio & Mario Pianta & Francesco Bogliacino, 2017. "Export, R&D and New Products: A Model and a Test on European Industries," Economic Complexity and Evolution, in: Andreas Pyka & Uwe Cantner (ed.), Foundations of Economic Change, pages 393-432, Springer.
    9. Agnieszka Gehringer & Inmaculada Martínez-Zarzoso & Felicitas Nowak-Lehmann Danzinger, 2016. "What are the drivers of total factor productivity in the European Union?," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 25(4), pages 406-434, June.
    10. Xu, Zhaoxia, 2020. "Economic policy uncertainty, cost of capital, and corporate innovation," Journal of Banking & Finance, Elsevier, vol. 111(C).
    11. Hong, Liu & Nikbakht, Ehsan & Zhou, Tianpeng, 2023. "Does product market competition affect the adoption of FinTech by non-financial firms?," Finance Research Letters, Elsevier, vol. 54(C).
    12. Amaia Altuzarra, 2024. "Innovation Persistence and Firm Growth: Do They Go Hand in Hand?," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(4), pages 18590-18616, December.
    13. Zukun Tan, 2024. "Top Management Team Stability and Corporate Innovation Sustainability," Sustainability, MDPI, vol. 16(11), pages 1-27, May.
    14. Maximiliano Machado, 2021. "Heterogeneous Innovation Persistence: Evidence From Uruguayan Firms," Documentos de Trabajo (working papers) 21-04, Instituto de Economía - IECON.
    15. M. Herrerias & Vicente Orts, 2012. "Equipment investment, output and productivity in China," Empirical Economics, Springer, vol. 42(1), pages 181-207, February.
    16. Edmund Ntom Udemba & Uju Violet Alola & Yizhi QIN, 2025. "Achieving sustainable economic development amidst conflicts: a study of the role of ease of doing business in development plan," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 12(1), pages 1-16, December.
    17. Ji, Baolong, 2025. "Supply chain finance and corporate persistent innovation—from the perspective of dynamic capabilities enhancement," International Review of Economics & Finance, Elsevier, vol. 103(C).
    18. Zhaohui Yan & Mingli Wang & Yumeng Sun & Zihui Nan, 2023. "The Impact of Research and Development Investment on Total Factor Productivity of Animal Husbandry Enterprises: Evidence from Listed Companies in China," Agriculture, MDPI, vol. 13(9), pages 1-21, September.
    19. V. Vandenberghe, 2018. "The Contribution of Educated Workers to Firms’ Efficiency Gains: The Key Role of Proximity to the ‘Local’ Frontier," De Economist, Springer, vol. 166(3), pages 259-283, September.
    20. Malmaeus, J. Mikael & Alfredsson, Eva C., 2017. "Potential Consequences on the Economy of Low or No Growth - Short and Long Term Perspectives," Ecological Economics, Elsevier, vol. 134(C), pages 57-64.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finlet:v:71:y:2025:i:c:s1544612324014703. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/frl .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.