Air pollution and technological innovation: Evidence from Chinese enterprises

Motivated by the severe threat of air pollution to global sustainable economic growth, particularly in emerging nations such as China, this study examines the impact of air pollution on the technological innovation of Chinese firms. We use multisource heterogeneous data, including air pollution raster data, patent information, and enterprise production data, to examine this issue with empirical methods such as a two-way fixed effects panel model, two-stage least squares (2SLS), subsample regression, and the Heckman selection model. The main findings reveal that a 10 % increase in air pollution reduces the number of firms’ patent applications by approximately 0.033 %. Mechanistic analysis reveals that air pollution inhibits enterprise innovation through three pathways: the crowding-out effect, the migration effect, and the mismatch effect. Expansion analysis further indicates that a greater frequency of fluctuations in regional air pollution exacerbates the inhibitory effect on innovation. Notably, air pollution decreases the amount of enterprise innovation and undermines its quality, as evidenced by reduced patent width and category diversity. The policy implications highlight the need for comprehensive green policies, targeted awareness campaigns for non-state-owned and highly competitive enterprises, talent compensation mechanisms, and air pollution early-warning systems.

Abstract licence: CC BY-NC

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