Research on the Impact of Environmental Regulation on Enterprise Innovation from the Perspective of Official Communication

Many developing countries including China are implementing increasingly stringent environmental regulations to achieve sustainable development. However, we have limited understanding about whether environmental regulations promote enterprise innovation. To address this research gap, this study empirically analyzes the impact of environmental regulations which is represented by the China Environmental Protection Law (2015) on enterprise innovation and it explores the moderating effects of official communication on environmental regulations and corporate innovation. The Super-Slacks-Based Measure (Super-SBM) model and Multiple Nonlinear Regression model are used to analyze 34,074 samples in China's A-share market during the 2015-2017 period. Our results show that, in general, a higher intensity of environmental regulations is more beneficial to incentivize enterprises to implement innovation. Meanwhile, there is an inverted U-type relationship between official communication and innovation of enterprises. Furthermore, at present, the average level of official communication in China is too high, which will weaken the role of environmental regulation in promoting enterprise innovation. Overall, this study can help us better understand the politics behind enterprise innovation in countries.