Regulation automation and green innovation: Evidence from China's industrial firms

Abstract

Stringent regulations can generate Hicksian induced innovation by minimizing compliance costs. Since 2013, China has progressively implemented the air quality automatic monitoring station initiative, significantly improving the standardization and efficacy of environmental regulation. This paper examines the impact of air quality monitoring stations on green innovation in industrial enterprises . By integrating geographical data on enterprises and monitoring stations, a distance-based difference-in-differences model is constructed. This study finds that the establishment of automatic monitoring stations within a 10-km radius of an enterprise leads to a 0.23% increase in green invention patents. From an external pressure perspective, the establishment of automatic monitoring stations strengthens public oversight and environmental enforcement. From an internal motivation perspective, it reduces corporate rent-seeking behavior and incentivizes firms to allocate more resources to innovation. Further analysis indicates that regulation automation exerts a stronger impact on green innovation in state-owned enterprises and firms near provincial borders, fostering energy technology development , reducing fossil fuel consumption, and thereby mitigating carbon dioxide emissions in the vicinity of enterprises.

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