Environmental regulations and green innovation of enterprises: quasi-experimental evidence from China

Whether environmental regulations are conducive to improving green innovation in water pollution-intensive enterprises (WPIEs) is of guiding significance for China’s protection of the water ecosystem environment and sustainable economic development. This study regards the implementation of the “Ten-point Water Plan” (TWP) policy in 2015 as a purely exogenous event for enterprises and employs a quasi-experimental method to fill this gap based on the panel data of Chinese listed companies from 2010 to 2019. The results reveal that TWP policy has significant negative effects on the green innovation of WPIEs, the main mechanism of which is increased compliance costs. In addition, a heterogeneity analysis shows that the negative effect is stronger for green innovation activities with higher costs and for WPIEs subject to stricter environmental regulations. This paper provides new evidence against the weak Porter hypothesis and implies that WPIEs are likely to purchase technologies and equipment to reduce wastewater emissions rather than green innovation, which means incentive-based measures should be taken to foster green innovation in the environmental policymaking process.