Environmental regulation, foreign investment, and green innovation: a case study from China

Green innovation (GI) has the dual attributes of green development and being innovation driven, and it has become an inevitable choice for solving the prisoner's dilemma of environmental protection and economic development under the action of the concept of sustainable development in the new era. This paper aims to clarify how environmental regulation (ER) can achieve a win‒win situation of GI and environmental protection by using data from prefecture-level cities in China and creating a dynamic panel model, quantile model, spatial econometric model, and panel threshold model to empirically analyze the dynamic effect and spatial effect of ER on GI as well as the nonlinear characteristics of the relationship between them and to examine the moderating effect of foreign direct investment (FDI). The results show that ER significantly promotes the development of the GI level and that FDI can play a positive moderating role. The impact has regional heterogeneity, time period heterogeneity, and resource endowment heterogeneity. After several robustness tests, the empirical conclusions are still credible. Based on the empirical conclusions, this paper makes policy suggestions on ER, foreign investment introduction, and the coordinated development of regional GI.