IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v13y2021i9p4862-d543826.html
   My bibliography  Save this article

Impact of Environmental Regulation Intensity on Green Technology Innovation: From the Perspective of Political and Business Connections

Author

Listed:
  • Yu-Hong Ai

    (School of Management, Nanchang University, Nanchang 330031, China
    School of Economics and Management, Nanchang Hangkong University, Nanchang 330063, China)

  • Di-Yun Peng

    (School of Economics and Management, Nanchang University, Nanchang 330031, China)

  • Huan-Huan Xiong

    (School of Economics and Management, Nanchang University, Nanchang 330031, China)

Abstract

With heavy air pollution and the highest CO 2 emissions in the world, China is in urgent need of technology innovation to improve the energy efficiency and control the pollution emission. This study empirically investigates the impact of environmental regulation intensity, political connections, and business connections on green technology innovation in China’s firms. The authors employ a panel data regression analysis on a dataset that comprises 884 observations for A-share listed companies from 2016 to 2019, owing to the availability of data. The results show: (1) Environmental regulation intensity (ERI) has a U-shaped effect on green technology innovation (GTI), which means GTI is inhibited by ERI in the early stage but gets promoted in the long run; (2) Political connections positively moderate the relationship between ERI and GTI mainly because of crowding-out effect and resource effect; (3) Business connections have a negative impact on the relationship between ERI and GTI, resulting from knowledge acquisition and lock-in; (4) Business connections have a greater moderating effect than political connections probably because political ties lack an effective mechanism to ensure long-term cooperation with the enterprises; (5) However, with regard to those firms in the non-heavily polluting industry, both connections moderate the relationship between ERI and GTI in an opposite direction to the main effect. The research results help policy makers formulate relevant policies, based on the impact of environmental regulation and social connections on green technology innovation.

Suggested Citation

  • Yu-Hong Ai & Di-Yun Peng & Huan-Huan Xiong, 2021. "Impact of Environmental Regulation Intensity on Green Technology Innovation: From the Perspective of Political and Business Connections," Sustainability, MDPI, vol. 13(9), pages 1-23, April.
    • Handle: RePEc:gam:jsusta:v:13:y:2021:i:9:p:4862-:d:543826
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/13/9/4862/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/13/9/4862/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ufuk Akcigit & Salomé Baslandze & Francesca Lotti, 2023. "Connecting to Power: Political Connections, Innovation, and Firm Dynamics," Econometrica, Econometric Society, vol. 91(2), pages 529-564, March.
    2. Wu, Jianfeng & Shanley, Mark T., 2009. "Knowledge stock, exploration, and innovation: Research on the United States electromedical device industry," Journal of Business Research, Elsevier, vol. 62(4), pages 474-483, April.
    3. Mark A. Cohen & Adeline Tubb, 2018. "The Impact of Environmental Regulation on Firm and Country Competitiveness: A Meta-analysis of the Porter Hypothesis," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 5(2), pages 371-399.
    4. Sen, Suphi, 2015. "Corporate governance, environmental regulations, and technological change," European Economic Review, Elsevier, vol. 80(C), pages 36-61.
    5. Sánchez-González, Gloria & González-Álvarez, Nuria & Nieto, Mariano, 2009. "Sticky information and heterogeneous needs as determining factors of R&D cooperation with customers," Research Policy, Elsevier, vol. 38(10), pages 1590-1603, December.
    6. Zhang, Dongyang & Guo, Yumei, 2019. "Financing R&D in Chinese private firms: Business associations or political connection?," Economic Modelling, Elsevier, vol. 79(C), pages 247-261.
    7. Claessens, Stijn & Feijen, Erik & Laeven, Luc, 2008. "Political connections and preferential access to finance: The role of campaign contributions," Journal of Financial Economics, Elsevier, vol. 88(3), pages 554-580, June.
    8. Cole, Matthew A. & Elliott, Robert J.R. & Okubo, Toshihiro, 2010. "Trade, environmental regulations and industrial mobility: An industry-level study of Japan," Ecological Economics, Elsevier, vol. 69(10), pages 1995-2002, August.
    9. Martina Blum‐Kusterer & S. Salman Hussain, 2001. "Innovation and corporate sustainability: An investigation into the process of change in the pharmaceuticals industry," Business Strategy and the Environment, Wiley Blackwell, vol. 10(5), pages 300-316, September.
    10. He, Jie, 2006. "Pollution haven hypothesis and environmental impacts of foreign direct investment: The case of industrial emission of sulfur dioxide (SO2) in Chinese provinces," Ecological Economics, Elsevier, vol. 60(1), pages 228-245, November.
    11. Lanjouw, Jean Olson & Mody, Ashoka, 1996. "Innovation and the international diffusion of environmentally responsive technology," Research Policy, Elsevier, vol. 25(4), pages 549-571, June.
    12. Giorgio Bellettini & Carlotta Berti Ceroni & Giovanni Prarolo, 2014. "Knowing The Right Person In The Right Place: Political Connections And Resistance To Change," Journal of the European Economic Association, European Economic Association, vol. 12(3), pages 641-671, June.
    13. Raymond Fisman & Yongxiang Wang, 2015. "The Mortality Cost of Political Connections," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 82(4), pages 1346-1382.
    14. Lise Tole & Gary Koop, 2011. "Do environmental regulations affect the location decisions of multinational gold mining firms?," Journal of Economic Geography, Oxford University Press, vol. 11(1), pages 151-177, January.
    15. Michael Greenstone & John A. List & Chad Syverson, 2011. "The Effects of Environmental Regulation on the Competiveness of U.S. Manufacturing," Working Papers 11-03, Center for Economic Studies, U.S. Census Bureau.
    16. David J. Teece & Gary Pisano & Amy Shuen, 1997. "Dynamic capabilities and strategic management," Strategic Management Journal, Wiley Blackwell, vol. 18(7), pages 509-533, August.
    17. Zhang, Min & Qi, Yinan & Wang, Zhiqiang & Zhao, Xiande & Pawar, Kulwant S., 2019. "Effects of business and political ties on product innovation performance: Evidence from China and India," Technovation, Elsevier, vol. 80, pages 30-39.
    18. Jing Li & Jun Xia & Edward J. Zajac, 2018. "On the duality of political and economic stakeholder influence on firm innovation performance: Theory and evidence from Chinese firms," Strategic Management Journal, Wiley Blackwell, vol. 39(1), pages 193-216, January.
    19. Raphael Calel & Antoine Dechezleprêtre, 2016. "Environmental Policy and Directed Technological Change: Evidence from the European Carbon Market," The Review of Economics and Statistics, MIT Press, vol. 98(1), pages 173-191, March.
    20. Zhenyi Wang & Jinjian Yang & Huqin He & Li Su, 2013. "The mechanism of politically-connected managers on technological innovation for small and medium high-tech enterprises - empirical evidence from listed firms in Chinese SMEs stock market," International Journal of Service and Computing Oriented Manufacturing, Inderscience Enterprises Ltd, vol. 1(2), pages 178-195.
    21. Yu, Xiaojun & Yao, Yao & Zheng, Huanhuan & Zhang, Lin, 2020. "The role of political connection on overinvestment of Chinese energy firms," Energy Economics, Elsevier, vol. 85(C).
    22. Nick Johnstone & Ivan Haščič & David Popp, 2010. "Renewable Energy Policies and Technological Innovation: Evidence Based on Patent Counts," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 45(1), pages 133-155, January.
    23. Bussolo,Maurizio & De Nicola,Francesca & Panizza,Ugo G. & Varghese,Richard, 2019. "Political Connections and Financial Constraints : Evidence from Transition Countries," Policy Research Working Paper Series 8956, The World Bank.
    24. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1991. "The Allocation of Talent: Implications for Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 503-530.
    25. Yan, Ziqiao & Li, Yue, 2018. "Signaling through government subsidy: Certification or endorsement," Finance Research Letters, Elsevier, vol. 25(C), pages 90-95.
    26. Federico Cingano & Paolo Pinotti, 2013. "Politicians At Work: The Private Returns And Social Costs Of Political Connections," Journal of the European Economic Association, European Economic Association, vol. 11(2), pages 433-465, April.
    27. Zhou, Wubiao, 2013. "Political connections and entrepreneurial investment: Evidence from China's transition economy," Journal of Business Venturing, Elsevier, vol. 28(2), pages 299-315.
    28. Manuel Frondel & Jens Horbach & Klaus Rennings, 2007. "End‐of‐pipe or cleaner production? An empirical comparison of environmental innovation decisions across OECD countries," Business Strategy and the Environment, Wiley Blackwell, vol. 16(8), pages 571-584, December.
    29. Yu He & Lei Xu & Ron P. McIver, 2019. "How does political connection affect firm financial distress and resolution in China?," Applied Economics, Taylor & Francis Journals, vol. 51(26), pages 2770-2792, June.
    30. Ouyang, Xiaoling & Sun, Chuanwang, 2015. "Energy savings potential in China's industrial sector: From the perspectives of factor price distortion and allocative inefficiency," Energy Economics, Elsevier, vol. 48(C), pages 117-126.
    31. Jaffe, Adam B. & Newell, Richard G. & Stavins, Robert N., 2005. "A tale of two market failures: Technology and environmental policy," Ecological Economics, Elsevier, vol. 54(2-3), pages 164-174, August.
    32. Mara Faccio, 2006. "Politically Connected Firms," American Economic Review, American Economic Association, vol. 96(1), pages 369-386, March.
    33. Roper, Stephen & Hewitt-Dundas, Nola, 2015. "Knowledge stocks, knowledge flows and innovation: Evidence from matched patents and innovation panel data," Research Policy, Elsevier, vol. 44(7), pages 1327-1340.
    34. Hamamoto, Mitsutsugu, 2006. "Environmental regulation and the productivity of Japanese manufacturing industries," Resource and Energy Economics, Elsevier, vol. 28(4), pages 299-312, November.
    35. Daniel F. Spulber, 1989. "Regulation and Markets," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262192756, April.
    36. Jianming Zhang & Gongqian Liang & Taiwen Feng & Chunlin Yuan & Wenbo Jiang, 2020. "Green innovation to respond to environmental regulation: How external knowledge adoption and green absorptive capacity matter?," Business Strategy and the Environment, Wiley Blackwell, vol. 29(1), pages 39-53, January.
    37. Hongbin Cai & Hanming Fang & Lixin Colin Xu, 2011. "Eat, Drink, Firms, Government: An Investigation of Corruption from the Entertainment and Travel Costs of Chinese Firms," Journal of Law and Economics, University of Chicago Press, vol. 54(1), pages 55-78.
    38. Szu‐Tung Lin & Han‐Jen Niu, 2018. "Green consumption: Environmental knowledge, environmental consciousness, social norms, and purchasing behavior," Business Strategy and the Environment, Wiley Blackwell, vol. 27(8), pages 1679-1688, December.
    39. Cumming, Douglas & Rui, Oliver & Wu, Yiping, 2016. "Political instability, access to private debt, and innovation investment in China," Emerging Markets Review, Elsevier, vol. 29(C), pages 68-81.
    40. Ying Qu & Ying Yu & Andrea Appolloni & Mengru Li & Yue Liu, 2017. "Measuring Green Growth Efficiency for Chinese Manufacturing Industries," Sustainability, MDPI, vol. 9(4), pages 1-18, April.
    41. Xie, Xuemei & Huo, Jiage & Zou, Hailiang, 2019. "Green process innovation, green product innovation, and corporate financial performance: A content analysis method," Journal of Business Research, Elsevier, vol. 101(C), pages 697-706.
    42. Cole, Matthew A. & Fredriksson, Per G., 2009. "Institutionalized pollution havens," Ecological Economics, Elsevier, vol. 68(4), pages 1239-1256, February.
    43. Kai Xu & Kuo-Feng Huang & Shanxing Gao, 2012. "The effect of institutional ties on knowledge acquisition in uncertain environments," Asia Pacific Journal of Management, Springer, vol. 29(2), pages 387-408, June.
    44. Li, Hongbin & Zhou, Li-An, 2005. "Political turnover and economic performance: the incentive role of personnel control in China," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1743-1762, September.
    45. Zhang, Cui, 2017. "Political connections and corporate environmental responsibility: Adopting or escaping?," Energy Economics, Elsevier, vol. 68(C), pages 539-547.
    46. Richard F. J. Haans & Constant Pieters & Zi-Lin He, 2016. "Thinking about U: Theorizing and testing U- and inverted U-shaped relationships in strategy research," Strategic Management Journal, Wiley Blackwell, vol. 37(7), pages 1177-1195, July.
    47. Panizza, Ugo & Bussolo, Maurizio & de Nicola, Francesca & Varghese, Richard, 2019. "Political Connections and Financial Constraints: Evidence from Central and Eastern Europe," CEPR Discussion Papers 14126, C.E.P.R. Discussion Papers.
    48. Joel F. Houston & Liangliang Jiang & Chen Lin & Yue Ma, 2014. "Political Connections and the Cost of Bank Loans," Journal of Accounting Research, Wiley Blackwell, vol. 52(1), pages 193-243, March.
    49. Ling, Leng & Zhou, Xiaorong & Liang, Quanxi & Song, Pingping & Zeng, Haijian, 2016. "Political connections, overinvestments and firm performance: Evidence from Chinese listed real estate firms," Finance Research Letters, Elsevier, vol. 18(C), pages 328-333.
    50. Jianhua Zhang & Xiaoqing Li & Hung‐Gay Fung & Penghua Qiao, 2019. "Do Political Connections Promote Innovation in Environmentally Polluting Enterprises?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 27(3), pages 76-101, May.
    51. Scott J. Wallsten, 2000. "The Effects of Government-Industry R&D Programs on Private R&D: The Case of the Small Business Innovation Research Program," RAND Journal of Economics, The RAND Corporation, vol. 31(1), pages 82-100, Spring.
    52. Asim Ijaz Khwaja & Atif Mian, 2005. "Do Lenders Favor Politically Connected Firms? Rent Provision in an Emerging Financial Market," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(4), pages 1371-1411.
    53. Solarin, Sakiru Adebola & Al-Mulali, Usama & Musah, Ibrahim & Ozturk, Ilhan, 2017. "Investigating the pollution haven hypothesis in Ghana: An empirical investigation," Energy, Elsevier, vol. 124(C), pages 706-719.
    54. Salome Baslandze, 2018. "Connecting to Power: Political Connections, Innovation, and Firm Dynamics," 2018 Meeting Papers 1036, Society for Economic Dynamics.
    55. Hou, Qingsong & Hu, May & Yuan, Yuan, 2017. "Corporate innovation and political connections in Chinese listed firms," Pacific-Basin Finance Journal, Elsevier, vol. 46(PA), pages 158-176.
    56. Yingyuan Guo & Xingneng Xia & Sheng Zhang & Danping Zhang, 2018. "Environmental Regulation, Government R&D Funding and Green Technology Innovation: Evidence from China Provincial Data," Sustainability, MDPI, vol. 10(4), pages 1-21, March.
    57. Simpson, R. David & Bradford, Robert III, 1996. "Taxing Variable Cost: Environmental Regulation as Industrial Policy," Journal of Environmental Economics and Management, Elsevier, vol. 30(3), pages 282-300, May.
    58. Liming Zhang & Fei Ye & Li Yang & Guichuan Zhou, 2019. "Impact of Political Connections on Corporate Environmental Performance: From a Green Development Perspective," Sustainability, MDPI, vol. 11(5), pages 1-17, March.
    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. Cai, Xiang & Zhao, Xiaohui & Jiang, Cuiting & Zhang, Liguo, 2024. "China's foreign direct investments: Do they promote domestic green technology?," Journal of Policy Modeling, Elsevier, vol. 46(1), pages 60-74.
    2. Yuanyang Wang & Yanlin Yang & Chenyu Fu & Zengzeng Fan & Xiaoping Zhou, 2021. "Environmental regulation, environmental responsibility, and green technology innovation: Empirical research from China," PLOS ONE, Public Library of Science, vol. 16(9), pages 1-21, September.
    3. Chenggang Wang & Tiansen Liu & Yue Zhu & Meng Lin & Wenhao Chang & Xinyu Wang & Dongrong Li & He Wang & Jinsol Yoo, 2022. "Digital Economy, Environmental Regulation and Corporate Green Technology Innovation: Evidence from China," IJERPH, MDPI, vol. 19(21), pages 1-18, October.
    4. Peter Mako & Andrej Dávid & Patrik Böhm & Sorin Savu, 2021. "Sustainable Transport in the Danube Region," Sustainability, MDPI, vol. 13(12), pages 1-21, June.
    5. Xiaowen Wang & Shuting Wang & Yunsheng Zhang, 2022. "The Impact of Environmental Regulation and Carbon Emissions on Green Technology Innovation from the Perspective of Spatial Interaction: Empirical Evidence from Urban Agglomeration in China," Sustainability, MDPI, vol. 14(9), pages 1-19, April.
    6. Han Wang & Zhuorui Han & Yang He, 2024. "The Levels of Government Environmental Attention and Enterprises’ Green Technological Innovation," Sustainability, MDPI, vol. 16(20), pages 1-26, October.

    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. Yuping Deng & Yanrui Wu & Helian Xu, 2020. "Political Connections and Firm Pollution Behaviour: An Empirical Study," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 75(4), pages 867-898, April.
    2. Michelson, Noam, 2023. "The revolving door of former civil servants and firm value: A comprehensive approach," European Journal of Political Economy, Elsevier, vol. 79(C).
    3. Han Yu & Abraham Y. Nahm & Zengji Song, 2022. "Turnover of local government core officials, political connections and the investment and financing of private‐sector enterprises," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(3), pages 3490-3509, July.
    4. Bussolo, Maurizio & de Nicola, Francesca & Panizza, Ugo & Varghese, Richard, 2022. "Politically connected firms and privileged access to credit: Evidence from Central and Eastern Europe," European Journal of Political Economy, Elsevier, vol. 71(C).
    5. Wei, Chunyan & Hu, Shiyang & Chen, Feng, 2020. "Do political connection disruptions increase labor costs in a government-dominated market? Evidence from publicly listed companies in China," Journal of Corporate Finance, Elsevier, vol. 62(C).
    6. repec:zbw:bofitp:2019_004 is not listed on IDEAS
    7. Deng, Yuping & Wu, Yanrui & Xu, Helian, 2019. "Political connections and firm pollution behaviour: An empirical study," BOFIT Discussion Papers 4/2019, Bank of Finland Institute for Emerging Economies (BOFIT).
    8. Yuping Deng & Yanrui Wu & Helian Xu, 2020. "Political Connections and Firm Pollution Behaviour: An Empirical Study," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 75(4), pages 867-898, April.
    9. Chahal, Rishman Jot Kaur & Ahmad, Wasim, 2022. "Political connections, investment inefficiency, and the Indian banking crisis," The Quarterly Review of Economics and Finance, Elsevier, vol. 85(C), pages 16-30.
    10. Chkir, Imed & Gallali, Mohamed Imen & Toukabri, Manara, 2020. "Political connections and corporate debt: Evidence from two U.S. election campaigns," The Quarterly Review of Economics and Finance, Elsevier, vol. 75(C), pages 229-239.
    11. Florackis, Chris & Fu, Xi & Wang, Jingjing, 2023. "Political connections, environmental violations and punishment: Evidence from heavily polluting firms," International Review of Financial Analysis, Elsevier, vol. 88(C).
    12. Hille, Erik & Althammer, Wilhelm & Diederich, Henning, 2020. "Environmental regulation and innovation in renewable energy technologies: Does the policy instrument matter?," Technological Forecasting and Social Change, Elsevier, vol. 153(C).
    13. Zhang, Cui, 2017. "Political connections and corporate environmental responsibility: Adopting or escaping?," Energy Economics, Elsevier, vol. 68(C), pages 539-547.
    14. Su, Zhong-qin & Xiao, Zuoping & Yu, Lin, 2019. "Do political connections enhance or impede corporate innovation?," International Review of Economics & Finance, Elsevier, vol. 63(C), pages 94-110.
    15. Jin, Xuejun & Chen, Zhenhao & Luo, Deming, 2019. "Anti-corruption, political connections and corporate responses: Evidence from Chinese listed companies," Pacific-Basin Finance Journal, Elsevier, vol. 57(C).
    16. Deng, Yuping & Wu, Yanrui & Xu, Helian, 2019. "Political turnover and firm pollution discharges: An empirical study," China Economic Review, Elsevier, vol. 58(C).
    17. Nan Zhang & Qiaozhuan Liang & Huiying Li & Xiao Wang, 2022. "The organizational relationship–based political connection and debt financing: Evidence from Chinese private firms," Bulletin of Economic Research, Wiley Blackwell, vol. 74(1), pages 69-105, January.
    18. Joonkyu Choi & Veronika Penciakova & Felipe Saffie, 2021. "Political Connections, Allocation of Stimulus Spending, and the Jobs Multiplier," FRB Atlanta Working Paper 2021-13, Federal Reserve Bank of Atlanta.
    19. Li, Guangzi & Chan, Kam C., 2021. "Anti-corruption intensity and loan contracting: Evidence from non-state owned firms in China," Emerging Markets Review, Elsevier, vol. 49(C).
    20. Colonnelli, Emanuele & Lagaras, Spyridon & Ponticelli, Jacopo & Prem, Mounu & Tsoutsoura, Margarita, 2022. "Revealing corruption: Firm and worker level evidence from Brazil," Journal of Financial Economics, Elsevier, vol. 143(3), pages 1097-1119.
    21. Xu, Le & Yang, Lili & Li, Ding & Shao, Shuai, 2023. "Asymmetric effects of heterogeneous environmental standards on green technology innovation: Evidence from China," Energy Economics, Elsevier, vol. 117(C).

    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:gam:jsusta:v:13:y:2021:i:9:p:4862-:d:543826. 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: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    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.