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The hidden spillover effects behind the green curtain: government environmental concern and green technology innovation in manufacturing

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  • Zhao, Kai
  • Wang, Kun

Abstract

Promoting green technology innovation (GTI) is a strategic imperative for advancing manufacturing competitiveness. Government environmental concern (GEC) functions as a wind vane, not only steering external innovation policies and firms’ internal R&D strategies but also influencing the flow of green finance, which alleviates firms’ financing constraints and strengthens their capacity for GTI. Employing the unbalanced panel microdata from 3248 Chinese manufacturing enterprises during 2007–2023, this paper empirically analyzes the incentive effect of GEC on GTI. The main findings are as follows: (1) GEC significantly promotes GTI, not only by shaping innovation expectations but also by alleviating firms’ financing constraints through guiding green financial resources and credit flows toward environmentally responsible enterprises. (2) Under environmental pressure, firms often adopt highly visible, low-cost innovation signals to gain policy support, and differences in policy urgency and focus shape their incentives for green technological innovation. GEC exerts a stronger driving effect on GTI in resource-based cities, with regenerative cities as the primary leaders in this process. (3) Increasing government subsidies and appointing executives with overseas and environmental backgrounds strengthen the incentive effect of GEC on GTI. (4) GEC has generated significant firm-level, regional, and environmental spillover effects in driving GTI.

Suggested Citation

  • Zhao, Kai & Wang, Kun, 2026. "The hidden spillover effects behind the green curtain: government environmental concern and green technology innovation in manufacturing," Finance Research Letters, Elsevier, vol. 87(C).
    • Handle: RePEc:eee:finlet:v:87:y:2026:i:c:s1544612325023426
    DOI: 10.1016/j.frl.2025.109093
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