Heterogeneous impacts of environmental regulations and foreign direct investment on green innovation across different regions in China

Highlights: • Command-and-control and informal regulation have significant "Porter's effect". • Market-based regulation negatively affects green innovation in China. • Inward FDI exerts "Pollution halo effect" on China's green innovation. • Outward FDI has a reverse green technique effect on China's green innovation. Green innovation (GI) is an important way to realize the sustainable development. This paper contributes to the existing literature by analyzing the effects of different environmental regulations on green innovation from a heterogeneous perspective. We also compare the impacts of indigenous innovation input and foreign technology spillover on green innovation. The dataset of this paper covers a panel of China's 30 provinces from 2003 to 2017. The results of Systematic Generalized Method of Moments (SYS-GMM) show that command-and-control regulation (CER) and informal regulation (IER) have significant "Porter's effect" on green innovation while market-based regulation (MER) negatively affects green innovation in China. Inward foreign direct investment (IFDI) plays a positive role in developing China's green innovation thus, validating the "Pollution Halo hypothesis". Outward direct investment (OFDI) has a reverse green technique effect on China's green innovation. In addition, the positive effect of indigenous innovation input on green innovation is larger than that of foreign technology spillover from IFDI and OFDI. Moreover, the strengthening of CER weakens the positive effect of IFDI on green innovation. By contrast, the increase of IER can promote the reverse green technology spillover effect of OFDI on green innovation. On the basis of results, the government should attract green inward FDI and invest on foreign technology-intensive industries to obtain green technology spillover and stimulate green innovation.