<p>This study examines how local officials’ promotion incentives affect firms’ green innovation. The Creating National Hygienic City campaign in China provides promotion incentives for local officials to voluntarily enhance environmental governance, which exerts political pressure on local polluting firms. We find that local polluting firms, relative to non-polluting firms, increase their green patent applications by 17.4 percentage points after their governments participate in the campaign. This effect is more pronounced when local economic performance is weaker and when firms exhibit a higher level of resource dependence on local governments. In addition, polluting firms receive more government subsidies and long-term loans after their local governments join the campaign. This suggests the effectiveness of green innovation as a corporate political strategy. Lastly, we find that the increased green patent applications are of low quality, indicating that firms’ green innovation improvement tends to be a symbolic response to local officials’ demand. Overall, our study provides insight into the impact of local officials’ promotion incentives on firms’ environmental ethics.</p>

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Local Officials’ Promotion Incentives and Green Innovation: Evidence from an Urban Governance Campaign in China

  • Ge Yang,
  • Haichen Bai,
  • Zeyu Sun

摘要

This study examines how local officials’ promotion incentives affect firms’ green innovation. The Creating National Hygienic City campaign in China provides promotion incentives for local officials to voluntarily enhance environmental governance, which exerts political pressure on local polluting firms. We find that local polluting firms, relative to non-polluting firms, increase their green patent applications by 17.4 percentage points after their governments participate in the campaign. This effect is more pronounced when local economic performance is weaker and when firms exhibit a higher level of resource dependence on local governments. In addition, polluting firms receive more government subsidies and long-term loans after their local governments join the campaign. This suggests the effectiveness of green innovation as a corporate political strategy. Lastly, we find that the increased green patent applications are of low quality, indicating that firms’ green innovation improvement tends to be a symbolic response to local officials’ demand. Overall, our study provides insight into the impact of local officials’ promotion incentives on firms’ environmental ethics.