From Disclosure to Innovation: How Publicizing Pollution Information Shapes Firms’ Clean Technology Development

While publicizing regulatory information, such as that on pollution, may enhance firms’ compliance, its endogenous effect on innovation remains unclear. Leveraging quasi-random variation in manufacturing firms’ responses to the People’s Republic of China’s 2014 pollution disclosure program, we show that making firms’ pollution information publicly available induces their short-run pollution-reducing innovation without crowding out other forms of innovation. The induced clean patents received more non-self citations than clean patents not driven by the disclosure program, suggesting a knowledge spillover effect. However, compared to their counterparts, publicized firms faced intensified regulatory enforcement and experienced economic losses, highlighting the burden on regulated firms. Evidence also suggests that firms’ innovative responses are stronger in cities where environmental regulations are enforced more actively, indicating that regulatory responsiveness may play a role in the effect of publicizing pollution information.