Impact of green factory certification on firms’ green innovation: Evidence from China

Continuously promoting green technological innovation in enterprises is not only an intrinsic need for China to realise its strategy of carbon peaking and carbon neutrality, but also an important impetus for the global realisation of sustainable development. As a new type of voluntary environmental regulation, it is of great significance to analyse how it promotes green technological innovation and its mechanism. This study takes the green factory certification system implemented in China as a policy shock and draws on the theory of voluntary environmental regulation. Exploiting the staggered adoption of certification across firms and time, we employ a multi-period difference-in-differences approach that effectively addresses endogeneity concerns and enables causal inference. Using panel data of Chinese listed companies from 2010 to 2023, we examine the relationship between voluntary environmental regulation and enterprises' green technological innovation. The empirical results show that green factory certification significantly promotes the quantity and improves the quality of corporate green technology innovation, with spillover effects on non-participating enterprises in the same industry. The positive effect is more pronounced in state-owned enterprises, firms in eastern China, and large-scale firms. Mechanistic analyses suggest that certification works through reducing financing constraints, strengthening internal controls, and increasing R&D investment. This study enriches the research on voluntary environmental regulation effects and provides insights for promoting sustainable development in developing countries.