Stringency of environmental regulation and eco-innovation: Evidence from the eleventh Five-Year Plan and green patents

Using the variation in pollution reduction targets across provinces and time variations (before and after the eleventh Five-Year Plan), we examine the impact of stricter environmental regulation upon the production of green patents by firms in China. We find that Chinese manufacturing firms, located in provinces with stricter pollution targets, produced a higher volume and intensity of green patents. Our results suggest that stricter environmental regulatory frameworks in emerging economies are not only combating pollution, but also shifting the innovation activities of manufacturing firms towards building a stock of knowledge in environmental protection. This process, undoubtedly, has the potential to generate disruptive eco-innovations.