Breaking the Cost Barrier: How Environmental Policy Intensity and Cost Stickiness Shape Green Innovation in China’s Manufacturing Sector

Facing a society that has accumulated many ecological and environmental problems, green technology innovation has gradually become an effective way to test the efficiency of environmental policies. This study investigated the impact of environmental policy intensity on green technological innovation within manufacturing enterprises listed in Shanghai and Shenzhen A-shares from 2010 to 2021. This research delved into the micro-level effects of such policies by utilizing data from various levels, including provinces, regions, enterprises, and years, along with a tailored environmental protection dictionary derived from government reports. It introduced the notion of cost stickiness to assess the relationship between regulatory stringency and innovation in the manufacturing sector. This study identified a specific regulatory intensity range within which environmental policies encourage green innovation, highlighting the importance of balanced regulation. This nuanced analysis contributes to a deeper understanding of the interplay between environmental regulation and technological innovation in manufacturing.