Regulatory distance and firms' environmental innovation: The role of environmental information disclosure and social trust

Abstract

Environmental innovation is an important force driving the development of a green and low‐carbon economy, and close supervision can assist the government in guiding firms' environmental innovation behavior. Based on institutional theory, we construct a model of the relationship between regulatory distance, environmental information disclosure, social trust, and firms' environmental innovation. We analyze a sample of 577 private A‐share listed manufacturing companies on the Shanghai and Shenzhen Stock Exchanges from 2012 to 2022 using multiple regression analysis to test the impact of regulatory distance on firms' environmental innovation. We also consider the mediating effect of environmental information disclosure and the moderating effect of social trust. The results show that an increase in regulatory distance has a negative impact on environmental innovation. Environmental information disclosure plays a partial mediating role between regulatory distance and environmental innovation, and social trust can weaken the negative impact of regulatory distance on environmental innovation. We propose various suggestions based on our findings to promote active environmental innovation by firms.