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Exploratory or exploitative green innovation? The role of different green fiscal policies in motivating innovation

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  • Liu, Jianing
  • Long, Fenjie
  • Chen, Lei
  • Li, Lei
  • Zheng, Longfei
  • Mi, Zhifu

Abstract

This study aims to explore how green fiscal policies influence different types of green innovations and to identify the most effective fiscal instruments for incentivizing each innovation type. To this end, we apply the innovation ambidexterity framework to green innovation and investigate the impacts of two green fiscal policy instruments, green subsidies, and effluent charges, on firms' innovation decisions. We construct a unique firm-level panel dataset by linking data of Chinese publicly listed companies to patent datasets. By developing an econometric model and employing fixed-effects regression and instrumental variable regression methods, we find that green subsidies promote exploratory green innovation significantly, whereas effluent charges are more likely to incentivize firms to pursue exploitative green innovation. Furthermore, we confirm that firms' choices in response to green fiscal policies vary according to their innovation capabilities and the intensity of market competition. Our findings provide a new perspective for understanding the debate surrounding the Porter Hypothesis and offer significant policy implications for motivating green innovation in developing countries.

Suggested Citation

  • Liu, Jianing & Long, Fenjie & Chen, Lei & Li, Lei & Zheng, Longfei & Mi, Zhifu, 2025. "Exploratory or exploitative green innovation? The role of different green fiscal policies in motivating innovation," Technovation, Elsevier, vol. 143(C).
    • Handle: RePEc:eee:techno:v:143:y:2025:i:c:s0166497225000392
    DOI: 10.1016/j.technovation.2025.103207
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    Keywords

    Exploratory green innovation; Exploitative green innovation; Green subsidies; Effluent charges; Green fiscal policies; China;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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