The impact of environmental regulation on enterprises' green innovation under the constraint of external financing: evidence from China's industrial firms.

In recent years, the value of green innovation in achieving high-quality development in China has been increasingly recognized. However, studies on different types of green innovation under various environmental regulations have not established a systematic framework; especially, those considering external financing constraints are lacking. This study subdivides both environmental regulation and green innovation. Specifically, environmental regulation is divided into command-and-control regulation, market-incentive regulation, and public-participation regulation. Green technology innovation is divided into cleaner production technology innovation and end-of-pipe technology innovation. Moreover, this study explores whether and how environmental regulation affects green technology innovation, and investigates the moderating effect of external financing constraints, by matching the data from China Environmental Yearbook and China Industrial Enterprise Database. The results show that both command-and-control regulation and market-incentive regulation have the U-shaped relationship with cleaner production technology innovation. Meanwhile, public-participation environmental regulation significantly and positively affects cleaner production technology innovation, whereas market-incentive regulation and public-participation regulation have the inverted U-shaped relationship with end-of-pipe technology innovation. In addition, the external financing constraints have a moderating effect on the relationship between environmental regulation and cleaner production technology innovation.