How Environmental Regulation Tools Affect Corporate Green Innovation : A Comparative Study between Voluntary and Mandatory Environmental Regulations

The environment governance in China is a hybrid of mandatory and voluntary regulations in implementation and enforcement. This paper aims to explore how voluntary environment regulations (VERs) such as ISO14001 certification affect corporate green innovation (CGI) and the role of mandatory environment regulations (MERs). We use a panel data of 1232 Chinese listed manufacturing firms from 2004 to 2016 and the main findings are: first, VERs has a significant positive effect on CGI. Second, no significant effect has been found between MERs and firms’ CGI. Third, in areas where government mandatory environmental regulations are weak, voluntary environmental regulation can better serve as a supplement to promote firms’ green innovation. Our results are robust to a series of sensitivity checks. This study provides evidence that voluntary environmental regulation is more effective in encouraging enterprises to engage in green innovation activities, and it is important supplement to mandatory environmental regulation