Air pollution and corporate innovation under China' s new and stringent round of environmental regulations

This study examines the impact of air pollution on corporate innovation and its heterogeneity effects from the perspective of the new Environmental Protection Law. It uses econometric methods to analyze the significant negative impact of air pollution on corporate innovation and green innovation in China using panel data from China's listed corporations between 2008 and 2019. The 2015 Environmental Protection Law fortunately reversed this trend, promoting innovation and indicating that regulatory improvements incentivized Innovation. The heterogeneity analysis of different patent types shows that, compared to utility model and design patents, invention patents are more negatively affected, indicating that air pollution has a more substantial inhibitory effect on high-innovation patents. Further heterogeneity analysis reveals that under weaker environmental regulations, air pollution significantly inhibits the innovation capacity of enterprises in less economically developed regions, heavily polluting industries, non-state-owned enterprises, and those in southern China. In contrast, the new Environmental Protection Law exerts a more pronounced positive incentive effect on innovation and green innovation in economically developed regions, non-heavy-polluting industries, non-state-owned enterprises, and enterprises in northern China. These findings suggest that the government can drive corporate transformation and upgrading, particularly in green innovation, by formulating differentiated environmental policies and enhancing regulatory transparency.