Optimal strategy for enterprises’ green technology innovation from the perspective of political competition

By Yaling Deng, Da-ming You, Jingjing Wang. Journal of Cleaner Production, 2019

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Abstract Different local governments engage in strategic interactions when they compete for resources to promote regional economic development under the background of ‘political tournaments’. Although many scholars have studied the impact of political competition among local governments on the environmental governance effect, they have paid less attention to the internal mechanism of the environmental benefits arising from political competition. Under the two scenarios of considering and not considering political competition, this paper uses Stackelberg game theory and optimization theory to analyse enterprises' optimal green technology innovation strategies. In addition, the impact of key factors is analysed based on the decision-making modes of cost-sharing and revenue-sharing, without cost-sharing and revenue-sharing, and centralized decision-making. This paper draws the following main conclusions: (1) Considering the influence of political competition, the optimal green technology innovation strategies of local governments and enterprises differ for different modes. (2) Political competition not only directly affects enterprises' optimal level of green technology innovation but also indirectly affects it by influencing the optimal investment ratio of environmental governance. The inverted U-shaped relationship between political competition and enterprises' optimal level of green technology innovation is related to the incentive coefficient of local government investment behaviour set by the central government. Controlling for the relative size of the incentive coefficient of local government investment in environmental governance and economic development can promote the positive impact of political competition on enterprises' optimal level of green technology innovation. (3) The decision-making mode of enterprises and local governments and environmental decentralization have significant effects on the optimal level of green technology innovation, which should be considered when the central government formulates effective environmental policies.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/7c39837587ec7dd73614d818a86bbad9099b69b0