Are Firms More Willing to Seek Green Technology Innovation in the Context of Economic Policy Uncertainty? —Evidence from China

Abstract

Frequent shifts in economic policies not only inject uncertainty into the economic landscape but also pose significant challenges to corporate endeavors in green technological innovation. Drawing on a dataset of Chinese A-share listed companies spanning 2008 to 2020, this research delves into the repercussions of economic policy uncertainty on the green technological pursuits of manufacturing firms and elucidates the underlying dynamics at play. The empirical evidence underscores a marked reluctance among companies to champion green technological innovation in the face of economic policy ambiguity, a stance that holds water even after rigorous robustness checks. Delving into the mechanisms, the study pinpoints heightened financial constraints and a diminishing risk appetite within the managerial ranks as pivotal deterrents steering firms away from green innovation projects amidst such uncertainty. Intriguingly, the adverse interplay between economic policy uncertainty and green innovation is especially accentuated in firms marked by tenuous government–business affiliations, pronounced monopolistic inclinations, lax intellectual property safeguards, minimal pollution footprints, and a skewed labor-to-capital composition. This investigation augments the scholarly discourse on the nexus between economic policy volatility and corporate green innovation, shedding light on strategic imperatives for emerging economies as they chart out future environmental blueprints and cultivate a conducive milieu for green innovation.

Can the Water Resource Fee-to-Tax Reform Promote the “Three-Wheel Drive” of Corporate Green Energy-Saving Innovations? Quasi-Natural Experimental Evidence from China

“…This has led to a lack of motivation for manufacturing enterprises to invest in potential green technology research and development, as they view its value as highly uncertain. During the implementation of the water resource fee-to-tax policy, most local governments in the pilot areas have yet to establish a clear timetable for industrial water-saving transformation and transition [38]. Local government decisions are still influenced by a "race-to-the-bottom competition" triggered by the "promotion tournament" [39], believing that supporting manufacturing enterprises in short-term, limited-return, vision-driven green energy-saving technological innovations would consume vast social resources and government finances.…”

The Impact of Economic Policy Uncertainty on Green Technology Innovation of New Energy Vehicle Enterprises in China

“…However, EPU can influence the market context for companies and limit the R&D resources they can access and use. For instance, EPU-induced market volatility may amplify the instability of firms' cash flows, thereby increasing the costs of external financing for companies [17,22,31]. In this situation, NEV enterprises may prefer to allocate limited R&D resources to innovation projects that can bring direct economic benefits in the short term rather than green technology innovations.…”

“…However, green technological innovation is currently facing unprecedented challenges due to economic policy uncertainty (EPU) [17][18][19][20]. In recent years, owing to the impact of a sluggish international market, trade protectionism, anti-globalization economic trends, and public health security concerns, governments worldwide have intervened in the market by formulating and implementing a series of economic stimulus policies [21,22].…”

“…Limited research has been dedicated to exploring the effect of EPU on green technological innovation in NEV enterprises. Current scholarly works primarily focus on the relationship between green technological innovation and EPU, but no consensus has been reached [17,18,24,31], reflecting the profound complexity of this field. Compared to general industries, the NEV industry is in a rapid development stage with competitive market incentives and high policy environment dependence [10,11,32].…”

Does AI Application Matter in Promoting Carbon Productivity? Fresh Evidence from 30 Provinces in China

“…The existence of the endogeneity problem can make results biased and inconsistent. In order to verify the reliability of the baseline regression results, referring to relevant studies [70,71], the following three methods are used to test robustness, and the results are shown in Table 4. Method 1: Winsorization (W).…”