Do Political Connections Promote Innovation in Environmentally Polluting Enterprises?

26 Pages Posted: 22 May 2019

See all articles by Jianhua Zhang

Jianhua Zhang

affiliation not provided to SSRN

Xiaoqing Li

affiliation not provided to SSRN

Hung-Gay Fung

University of Missouri at Saint Louis - College of Business Administration

Peng Qiao

Kunming University of Science and Technology

Date Written: May–June 2019

Abstract

We use an unbalanced panel data analysis to examine the effect of political connections (PCs) in state‐owned enterprises (SOE) and non‐SOEs on the innovation of Chinese environmentally polluting enterprises listed on the Shanghai and Shenzhen Stock Exchanges from 2007 to 2016. Our sample consists of 792 firms and 4587 firm‐year observations. There are several interesting findings. First, SOEs that are politically linked to the central government promote more innovation in general and more environmental innovation than SOEs without these links. Second, privately‐owned enterprises (non‐SOEs) with PCs promote less environmental innovation than non‐SOEs without PCs. Third, environmental regulation does not affect the environmental innovation of SOEs but it drives non‐SOEs with PCs to become more environmentally innovative. Our results enable us to better understand how PCs and regulations affect environmental innovation.

Keywords: environmental innovation, environmental regulation, highly polluting enterprises, political connections

JEL Classification: G28, G31, G32

Suggested Citation

Zhang, Jianhua and Li, Xiaoqing and Fung, Hung-Gay and Qiao, Peng, Do Political Connections Promote Innovation in Environmentally Polluting Enterprises? (May–June 2019). China & World Economy, Vol. 27, Issue 3, pp. 76-101, 2019. Available at SSRN: https://ssrn.com/abstract=3391962 or http://dx.doi.org/10.1111/cwe.12281

Jianhua Zhang

affiliation not provided to SSRN

Xiaoqing Li

affiliation not provided to SSRN

Hung-Gay Fung

University of Missouri at Saint Louis - College of Business Administration ( email )

One University Blvd.
487 SSB
St. Louis, MO 63121
United States
314-516-6374 (Phone)

Peng Qiao (Contact Author)

Kunming University of Science and Technology ( email )

Kunming Yunnan China
Kunming, Yunnan
China

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