Can environmental regulation break the political resource curse: evidence from heavy polluting private listed companies in China

• Published in: Journal of environmental planning and management Vol. 67; no. 13; pp. 3190 - 3216
• Main Authors: Gao, Da, Li, Yi, Tan, Linfang
• Format: Journal Article
• Language: English
• Published: Abingdon Routledge 09.11.2024; Taylor & Francis Ltd
• Subjects: administrative management; adverse effects; China; Closely held corporations; corporate technological innovation; Empirical analysis; empirical research; environmental law; Environmental policy; Environmental protection; environmental regulation; Environmental regulations; industry; Innovations; market competition; Markets; Motivation; political connections; political resource curse; Politics; Pollution; R&D; Regulation; Regulations; Rent-seeking; Research & development; Side effects; Technological change; technology; China
• ISSN: 0964-0568; 1360-0559; 1360-0559
• DOI: 10.1080/09640568.2023.2218988

This paper aims to explore whether the over-reliance on political resources hampers corporate technological innovation and the role of environmental regulation in mitigating the adverse effect. A simplified theoretical framework is proposed to combine political ties, environmental regulations, and corporate innovation. Then, based on the data for listed private companies in China's heavy pollution industry, our empirical results show that political relations have negative impacts on both patent licensing and R&D investment, indicating the existence of a political resource curse in listed private companies in China's heavy pollution industry. The transmission mechanisms include mitigating market competition and inducing overinvestment, but increasing the rent-seeking motivation is not a channel through which political connections negatively affect corporate innovation. Further empirical analysis demonstrates that environmental regulations help eliminate the curse effect of political ties on technological innovation at the firm level in China, through increasing market competition and reducing overinvestment. The findings of this paper provide insights for optimizing environmental regulation policies, which are conducive to inducing technical innovation in politically connected enterprises.