Can vertical environmental regulation induce enterprise green innovation? A new perspective from automatic air quality monitoring station in China

Abstract

Based on panel data of listed companies in China from 2006 to 2020, this study takes the establishment of automatic air quality monitoring stations as a quasi-natural experiment and uses the staggered difference-in-differences method to explore whether the establishment of monitoring stations promotes green innovation of listed companies. The empirical results show that: (1) The green innovation of companies achieves an increase of 3.5% with monitoring stations in their locations, and an increase of 2.3% with the establishment of each additional monitoring station. This conclusion is valid after a series of robustness tests and exclusive tests. (2) The heterogeneity analyses show that monitoring stations have a greater role in promoting green innovation for non-state-owned enterprises, enterprises in heavy polluting industries and enterprises in key cities for environmental protection. (3) The transmission mechanism test results show that the establishment of automatic air monitoring station has crowding-out effect rather than leverage effect on green innovation, substantial innovation rather than strategic innovation. (4) The further analyses manifest the promotion of end-to-end green innovation, independent invention and quality of green patents.

Keywords: Automatic air quality monitoring station; Enterprise green innovation; Staggered difference-in-differences method; Vertical environmental regulation.