Environmental regulation, innovation quality and firms’ competitivity―Quasi-natural experiment based on China’s carbon emissions trading pilot

Abstract

In the study of the "Porter Hypothesis", scholars explored the impact of different forms of innovation on the firms' competitivity, but did not distinguish between innovations on the difference in patent quality. In addition, relevant research only regards innovation as a mediator between environmental regulation and competitivity, and doesn't take into account innovation induced by environmental regulation, can only promote competitivity under the constraints of environmental regulation. That is to say, environmental regulation not only induces innovation, but also moderates innovation to promote competitivity. In view of this, we use panel data of A-share listed firms in China from 2006 to 2016, and adopt propensity score matching and different in different (PSM-DID) model to empirically test the inductive effect and moderating effect. The results show that CETS cannot only improve the quantity and quality, but also significantly enhance the firms' market value; innovation itself cannot enhance the firms' market value, but the interaction with CETS can promote the firms' market value. In addition, the CETS has a stronger inductive effect on innovation of state-owned shares firms, but the positive moderating effect on high-quality innovation and competitivity only exists in non-state-owned shares firms.

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