Environmental regulation, market demand, and green innovation: spatial perspective evidence from China

This paper used a dynamic spatial panel model to empirically analyze the effects of environmental regulation, market demand, and the associated spatial spillovers on regional green innovation in China, from which the following was found. (1) The environmental regulations had a positive “U-shaped” effect on local green innovation and a positive neighborhood spillover effect, and market demand had a significant positive effect on local green innovation and a “ripple effect.” (2) The mechanism analysis found that the environmental regulations tended to inhibit regional green innovation input through a “cost compliance” effect, and market demand had a stronger incentive effect on innovation input than the environmental regulations, thus promoting the improvement of green innovation level. (3) The environmental regulation and market demand effects on green innovation had obvious spatial and temporal heterogeneity. The results of this study could help to promote regional green innovation by formulating reasonable environmental policies and stimulating the vitality of green technology market.