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Carbon Pricing, Digital Transformation, and Green Innovation: Evidence from China’s Emission Trading Pilots

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  • Mingjian Xie

    (Faculty of Humanities and Social Sciences, Macao Polytechnic University, Macao 999078, China)

  • Zhibin Tao

    (Department of Accountancy and Finance, University of Otago, Dunedin 9054, New Zealand)

  • Yuanyuan Yu

    (Faculty of Humanities and Social Sciences, Macao Polytechnic University, Macao 999078, China)

Abstract

Whether China’s carbon trading pilots stimulate firm-level innovation remains contested. This study investigates the conditional effect of carbon pricing on green invention patents, moderated by firms’ digital transformation capability. Using an unbalanced panel of 31,048 firm-year observations from A-share listed companies (2011–2022) and a two-way fixed-effects difference-in-differences estimator, we find no significant unconditional average treatment effect, consistent with attenuated price signals in China’s pilots. However, digital capability substantially amplifies the innovation response: a one-standard-deviation increase in within-year digital capability is associated with a 4.6% rise in expected green invention patents among treated firms. The moderating effect is exclusive to examination-intensive invention patents rather than utility model registrations, consistent with a strong-form Porter mechanism. Sub-dimension analysis identifies strategic leadership and digital achievement as the operative channels. The results are robust to alternative estimators, cohort decomposition, and sample restrictions. Together, the findings reframe digital transformation as a policy-contingent complementary asset and extend the Porter hypothesis to an organizational-capabilities dimension.

Suggested Citation

  • Mingjian Xie & Zhibin Tao & Yuanyuan Yu, 2026. "Carbon Pricing, Digital Transformation, and Green Innovation: Evidence from China’s Emission Trading Pilots," Administrative Sciences, MDPI, vol. 16(8), pages 1-17, August.
    • Handle: RePEc:gam:jadmsc:v:16:y:2026:i:8:p:374-:d:2006462
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