Abstract
The evaluation on the performance of environmental regulation is among the hottest topics in environmental economics and management. Although industrial enterprise is the major regulatory objects of pollution control, the firm-level pollution abatement effect of environmental regulation has been rarely examined by existing literature. This paper attempts to fill this research gap by investigating the moderating effects of firm heterogeneity on the pollution abatement effect of environmental regulation in China. We establish a theoretical framework which demonstrates that firm heterogeneity determines firms’ compliance capability and willingness through firms’ absorptive capacity, bargaining power, and environmental awareness and then influences firms’ environmental performance under regulatory pressure. Combining firm-level data of pollutant emission with province-level data of environmental regulation, we empirically examine the moderating role of firm heterogeneity on the performance of environmental regulation. We adopt a moderating effect model and estimate it with Logit regression method. It is found that environmental regulation performs better in enterprises with high capital intensity, high total factor productivity (TFP), as well as in state-owned enterprises, export enterprises, and listed companies. In particular, command-and-control regulation performs better in domestic firms than in foreign-owned firms, while the performance of market-based regulation is just the opposite. It is also found that the moderating effect of firm heterogeneity on the performance of environmental regulation varies with regions and industrial sectors, especially for the moderating role of capital intensity and TFP. These findings help to understand the enterprise environmental behavior and provide insights on targeted and differentiated environmental governance from a micro-point of view.
Similar content being viewed by others
References
Ahuti, S. (2015). Industrial growth and environmental degradation. International Education and Research Journal, 1(5), 5–7.
Baron, R. M., & Kenny, D. A. (1986). The moderator-mediator variable distinction in social psychological research: Conceptual, strategic, and statistical considerations. Journal of Personality and Social Psychology, 51, 1173–1182.
Barrett, S. (1994). Strategic environmental policy and international trade. Journal of Public Economics, 54(3), 325–338.
Bu, M., & Wagner, M. (2016). Racing to the bottom and racing to the top: The crucial role of firm characteristics in foreign direct investment choices. Journal of International Business Studies, 47(9), 1032–1057.
Bu, M., Zhai, S., Zhang, J., & Zheng, W. (2014). Foreign Direct Investment and Pollution Havens Hypothesis: Firm-Level Panel Data Evidence from China. Frontiers of Economics and Globalization, 14, 73–96.
Cai, H., & Liu, Q. (2009). Competition and corporate tax avoidance: Evidence from Chinese industrial enterprises. The Economic Journal, 119(537), 764–795.
Cao, X., Wang, P., & Zhu, B. (2018). Has foreign direct investment increased air pollution in China? A hierarchical linear model approach. Natural Hazards, 91(2), 659–669.
Chen, Q., Maung, M., Shi, Y., & Wilson, C. (2014). Foreign direct investment concessions and environmental levies in China. International Review of Financial Analysis, 36, 241–250.
Cheng, Z., Li, L., & Liu, J. (2017). The emissions reduction effect and technical progress effect of environmental regulation policy tools. Journal of Cleaner Production, 149, 191–205.
Clarkson, P. M., Li, Y., Richardson, G. D., & Vasvari, F. P. (2011). Does it really pay to be green? Determinants and consequences of proactive environmental strategies. Journal of Accounting and Public Policy, 30(2), 122–144.
Cohen, W. M., & Levinthal, D. A. (1990). Absorptive capacity: A new perspective on learning and innovation. Administrative Science Quarterly, 35, 128–152.
Cole, M. A. (2004). Trade, the pollution haven hypothesis and the environmental Kuznets curve: Examining the linkages. Ecological Economics, 48(1), 71–81.
Cui, J., Lapan, H., & Moschini, G. (2016). Productivity, export, and environmental performance: Air pollutants in the United States. American Journal of Agricultural Economics, 98(2), 447–467.
D’Agostino, L. M. (2015). How MNEs respond to environmental regulation: Integrating the Porter hypothesis and the pollution haven hypothesis. Economia Politica, 32(2), 245–269.
Dam, L., & Scholtens, B. (2008). Environmental regulation and MNEs location: Does CSR matter? Ecological Economics, 67(1), 55–65.
Dasgupta, S., Laplante, B., & Mamingi, N. (2001). Pollution and capital markets in developing countries. Journal of Environmental Economics and Management, 42(3), 310–335.
Demirel, P., & Kesidou, E. (2011). Stimulating different types of eco-innovation in the UK: Government policies and firm motivations. Ecological Economics, 70(8), 1546–1557.
Earnhart, D. H., Khanna, M., & Lyon, T. P. (2014). Corporate environmental strategies in emerging economies. Review of Environmental Economics and Policy, 8(2), 164–185.
Fairchild, A. J., & MacKinnon, D. P. (2009). A general model for testing mediation and moderation effects. Prevention Science: The Official Journal of the Society for Prevention Research, 10(2), 87–99. https://doi.org/10.1007/s11121-008-0109-6
Frondel, M., Horbach, J., & Rennings, K. (2007). End-of-pipe or cleaner production? An empirical comparison of environmental innovation decisions across OECD countries. Business Strategy and the Environment, 16(8), 571–584.
Greaney, T. M., Li, Y., & Tu, D. (2017). Pollution control and foreign firms’ exit behavior in China. Journal of Asian Economics, 48, 148–159.
Gschwandtner, A., & Lambson, V. E. (2006). Sunk costs, profit variability, and turnover. Economic Inquiry, 44(2), 367–373.
Hao, Y., Deng, Y., Lu, Z. N., & Chen, H. (2018). Is environmental regulation effective in China? Evidence from city-level panel data. Journal of Cleaner Production, 188, 966–976.
Harrison, K., & Antweiler, W. (2003). Incentives for pollution abatement: Regulation, regulatory threats, and non-governmental pressures. Journal of Policy Analysis and Management, 22(3), 361–382.
He, J. (2006). Pollution haven hypothesis and environmental impacts of foreign direct investment: The case of industrial emission of sulfur dioxide (SO2) in Chinese provinces. Ecological Economics, 60(1), 228–245.
He, J., & Wang, H. (2012). Economic structure, development policy and environmental quality: An empirical analysis of Environmental Kuznets Curves with Chinese municipal data. Ecological Economics, 76, 49–59.
Head, K., & Ries, J. (2003). Heterogeneity and the FDI versus export decision of Japanese manufacturers. Journal of the Japanese and International Economies, 17(4), 448–467.
Horbach, J. (2008). Determinants of environmental innovation—New evidence from German panel data sources. Research Policy, 37(1), 163–173.
Huang, C. L., & Kung, F. H. (2011). Environmental consciousness and intellectual capital management. Management Decision, 49(9–10), 1405–1425.
Jaffe, A. B., Newell, R. G., & Stavins, R. N. (2002). Environmental policy and technological change. Environmental and Resource Economics, 22(1), 41–70.
Jiang, L., Lin, C., & Lin, P. (2014). The determinants of pollution levels: Enterprise-level evidence from Chinese manufacturing. Journal of Comparative Economics, 42(1), 118–142.
Johansson, B., & Lööf, H. (2008). Innovation activities explained by firm attributes and location. Econ. Innov. New Techn., 17(6), 533–552.
Kesidou, E., & Demirel, P. (2012). On the drivers of eco-innovations: Empirical evidence from the UK. Research Policy, 41(5), 862–870.
Lanoie, P., Laurent-Lucchetti, J., Johnstone, N., & Ambec, S. (2011). Environmental policy, innovation and performance: New insights on the Porter hypothesis. Journal of Economics & Management Strategy, 20(3), 803–842.
Lee, A. I., & Alm, J. (2004). The Clean Air Act amendments and firm investment in pollution abatement equipment. Land Economics, 80(3), 433–447.
Liao, H., & Li, L. (2021). Environmental sustainability EOQ model for closed-loop supply chain under market uncertainty: A case study of printer remanufacturing. Computers & Industrial Engineering, 151, 106525.
Liao, Z., Xu, C. K., Cheng, H., & Dong, J. (2018). What drives environmental innovation? A content analysis of listed companies in China. Journal of Cleaner Production, 198, 1567–1573.
Liu, C. Y., & Wu, C. H. (2009). Environmental consciousness, reputation and voluntary environmental investment. Australian Economic Papers, 48(2), 124–137.
Liu, M., Shadbegian, R., & Zhang, B. (2017). Does environmental regulation affect labor demand in China? Evidence from the textile printing and dyeing industry. Journal of Environmental Economics and Management, 86, 277–294.
Liu, T., Zhang, Y., & Liang, D. (2019). Can ownership structure improve environmental performance in Chinese manufacturing enterprises? The moderating effect of financial performance. Journal of Cleaner Production, 225, 58–71.
Maung, M., Wilson, C., & Tang, X. (2016). Political connections and industrial pollution: Evidence based on state ownership and environmental levies in China. Journal of Business Ethics, 138(4), 649–659.
Mol, A. P., & Carter, N. T. (2006). China’s environmental governance in transition. Environmental Politics, 15(02), 149–170.
Pacheco, L. M., Alves, M. F. R., & Liboni, L. B. (2018). Green absorptive capacity: A mediation-moderation model of knowledge for innovation. Business Strategy and the Environment, 27(8), 1502–1513.
Pang, R., Zheng, D., Shi, M., & Zhang, X. (2019). Pollute first, control later? Exploring the economic threshold of effective environmental regulation in China’s context. Journal of Environmental Management, 248, 109275.
Paquin, R. L., Busch, T., & Tilleman, S. G. (2015). Creating economic and environmental value through industrial symbiosis. Long Range Planning, 48(2), 95–107.
Pei, Y., Zhu, Y., Liu, S., et al. (2021). Industrial agglomeration and environmental pollution: Based on the specialized and diversified agglomeration in the Yangtze River Delta. Environment, Development and Sustainability, 23, 4061–4085.
Porter, M. E., & Van der Linde, C. (1995). Toward a new conception of the environment-competitiveness relationship. Journal of Economic Perspectives, 9(4), 97–118.
Qiu, L. D., Zhou, M., & Wei, X. (2018). Regulation, innovation, and firm selection: The porter hypothesis under monopolistic competition. Journal of Environmental Economics and Management, 92, 638–658.
Ren, S., Li, X., Yuan, B., Li, D., & Chen, X. (2018). The effects of three types of environmental regulation on eco-efficiency: A cross-region analysis in China. Journal of Cleaner Production, 173, 245–255.
Richter, P. M., & Schiersch, A. (2017). CO2 emission intensity and exporting: Evidence from firm-level data. European Economic Review, 98, 373–391.
Shen, N., Liao, H., Deng, R., & Wang, Q. (2019). Different types of environmental regulations and the heterogeneous influence on the environmental total factor productivity: Empirical analysis of China’s industry. Journal of Cleaner Production, 211, 171–184.
Shi, H., & Zhang, L. (2006). China’s environmental governance of rapid industrialization. Environmental Politics, 15(02), 271–292.
Sinani, E., & Hobdari, B. (2010). Export market participation with sunk costs and firm heterogeneity. Applied Economics, 42(25), 3195–3207.
Solarin, S. A., Al-Mulali, U., Musah, I., & Ozturk, I. (2017). Investigating the pollution haven hypothesis in Ghana: An empirical investigation. Energy, 124, 706–719.
Ulph, A. (1994). Environmental policy, plant location and government protection. Springer Netherlands.
Wang, H., & Jin, Y. (2002). Industrial ownership and environmental performance: evidence from China. The World Bank.
Wang, H., Mamingi, N., Laplante, B., & Dasgupta, S. (2003). Incomplete enforcement of pollution regulation: Bargaining power of Chinese factories. Environmental and Resource Economics, 24(3), 245–262.
Wang, Q., & Yuan, B. (2018). Air pollution control intensity and ecological total-factor energy efficiency: The moderating effect of ownership structure. Journal of Cleaner Production, 186, 373–387.
Wang, T., Tian, M., & Liu, Z. (2019a). Unpacking the influence of major cities on corporate environmental performance in China: A perspective of spatial knowledge spillover. Applied Ecology and Environmental Research, 17(6), 14561–14576.
Wang, X., Zhang, C., & Zhang, Z. (2019). Pollution haven or porter? The impact of environmental regulation on location choices of pollution-intensive firms in China. Journal of Environmental Management, 248, 109248.
World Bank. (1995). Bureaucrats in business: The economics and politics of government ownership. Oxford University Press.
Xing, L., Shi, L., & Hussain, A. (2010). Corporations response to the energy saving and pollution abatement policy. International Journal of Environmental Research, 4(4), 637–646.
Zhang, B., Yang, S., & Bi, J. (2013). Enterprises’ willingness to adopt/develop cleaner production technologies: An empirical study in Changshu, China. Journal of Cleaner Production, 40, 62–70.
Zhang, J., Liang, G., Feng, T., Yuan, C., & Jiang, W. (2020). Green innovation to respond to environmental regulation: How external knowledge adoption and green absorptive capacity matter? Business Strategy and the Environment, 29(1), 39–53.
Zhang, M., Liu, Y., Wu, J., & Wang, T. (2018a). Index system of urban resource and environment carrying capacity based on ecological civilization. Environmental Impact Assessment Review, 68, 90–97.
Zhang, X., Shi, M., Li, Y., Pang, R., & Xiang, N. (2018b). Correlating pm 2.5, concentrations with air pollutant emissions: A longitudinal study of the Beijing-Tianjin-Hebei region. Journal of Cleaner Production, 179, 103–113.
Zheng, D., & Shi, M. (2017). Multiple environmental policies and pollution haven hypothesis: Evidence from China’s polluting industries. Journal of Cleaner Production, 141, 295–304.
Zheng, D., Shi, M., & Pang, R. (2021). Agglomeration economies and environmental regulatory competition: Evidence from China. Journal of Cleaner Production, 280, 124506.
Funding
This work was supported by the National Natural Science Foundation of China under Grant [No. 71503241] and the Fundamental Research Funds for the Central Universities.
Author information
Authors and Affiliations
Corresponding author
Ethics declarations
Conflicts of interest
The authors declare there are no conflicts of interest regarding the publication of this paper.
Additional information
Publisher's Note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Rights and permissions
About this article
Cite this article
Pang, R., Shi, M. & Zheng, D. Who comply better? The moderating role of firm heterogeneity on the performance of environmental regulation in China. Environ Dev Sustain 24, 6302–6326 (2022). https://doi.org/10.1007/s10668-021-01703-7
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10668-021-01703-7