Urban construction and firm green innovation: Evidence from China's low-carbon pilot city initiative

Urban construction plays an important role in firms' environmental considerations. This paper examines the effect of low-carbon urban construction on firm green innovation, using China's low-carbon pilot program as a quasi-natural experiment. Our results show that the construction of low-carbon pilot cities can promote firm green innovation. Further analyses reveal that the positive effect of low-carbon pilot city construction on firm green innovation is more pronounced in regions with high degrees of intellectual property protection, in less financially constrained firms, and in state-owned enterprises. We also examine the mechanism for these relationships and find that the positive effect of low-carbon pilot city construction on firm green innovation is realized through strengthening environmental regulation, enhancing environmental governance, and increasing enterprises' environmental awareness. Collectively, these findings suggest that urban construction matters for firm green innovation in emerging markets.