Environmental Regulation and Enterprise Innovation: A Review

Abstract

The impact of environmental regulation on enterprise innovation is closely related to the competitiveness of the enterprise and sustainable development of the regional economy, but existing research does not provide a consistent view. This paper summarizes the impacts of environmental regulation on enterprise innovation from the perspectives of technological innovation, product innovation, system innovation and ecological innovation. We find that the impacts of environmental regulation on enterprise innovation behaviour are complex, and that the impacts can be reflected together by the four aspects above and even by their interaction. Moreover, the impacts are not limited to the creation of new technologies, products, and systems but also include their adoption and application. In particular, whether the Porter hypothesis is true and which versions of the Porter hypothesis environmental regulation causes in enterprise innovation depend on enterprise characteristics, means of environmental regulation, and enterprises' strategic behaviours in an enterprise ecosystem. Finally, we propose five potential research directions: quantifying the degree of enterprise innovation caused by environmental regulation, the impacts of environmental regulation on sustainable economic development from an enterprise ecosystem perspective, the impacts of enterprise innovation on environmental regulation, the role of enterprise initiative in the relationship between environmental regulation and enterprise innovation, and social security issues and the integration of eliminated enterprises resulting from environmental regulation.

Business‐oriented environmental regulation: Measurement and implications for environmental policy and business strategy from a sustainable development perspective

“…The objective of behavioral compliance evaluations is to measure the capacity of the regulation to generate a response from the company and enact changes in the organization. At this level, it is possible to identify if the company has any strategic responses such as acquiescence, compromise, avoidance, defiance, or manipulation as described by Clemens, Bamford, and Douglas (2008), for example, the improvement of innovation in response to environmental regulation (Shao, Hu, Cao, Yang, & Guan, 2020). Finally, the objective of outcome performance evaluations focuses on the effectiveness of the actions that companies implement to comply with the regulation, for example, the reduction of polluting emissions into the atmosphere after submitting to environmental regulation (Bi, Song, Zhou, & Liang, 2014; Carrión, Innes, & Sam, 2013).…”

Do environmental regulations hamper small enterprises' market entry? Evidence from China

“…Considering that stringent environmental regulations can increase the pollution control costs of enterprises, pollution control costs can therefore be used to effectively reflect the intensity of environmental regulations faced by enterprises. Therefore, this study adopts the third indicator, which has been adopted by many previous studies (Ai et al, 2020; Shao et al, 2020).…”

“…Those SEs that engage in innovative behaviors can avoid the adverse effects of environmental regulations (Chang & Sam, 2015; Song, Wang, & Sun, 2018; Yuan & Zhang, 2017). According to different innovative objectives, innovations can be divided into three categories, namely, process innovation, product innovation, and technological innovation (Shao, Hu, Cao, Yang, & Guan, 2020). Some studies confirm that environmental regulations in China can stimulate the technological innovation of enterprises through R&D activities (Zhao & Sun, 2015).…”

Environmental regulations, green innovation and intelligent upgrading of manufacturing enterprises: evidence from China

“…Some scholars have researched and proposed that technological innovation can promote the intelligent upgrade of manufacturing enterprises, and technological innovation is an important driving force for the intelligent upgrade of manufacturing enterprises 24 . However, green innovation will cause enterprises to generate additional investment in innovation 42 , that is to say, relative to technological innovation, green innovation will increase the production cost of enterprises, whether green innovation will affect the intelligent upgrade of manufacturing enterprises, and how much impact, is still worthy of further research.…”