Green shrinkage: The heterogeneous regional effects of environmental regulation on green innovation

This study utilizes China's ratification of the Paris Agreement in 2016 as a quasi-natural experiment to examine the effects of environmental regulation on green innovation within listed companies, particularly focusing on the role of urban shrinkage. Results show that environmental regulation boosts corporate green innovation through stricter penalties and increased support for environmental protection. However, in shrinking cities, this positive influence is weakened or even turns negative, due to decreased green investment and slower growth of high-tech talent. In addition, heterogeneity analysis indicates that the severity of this impact is more pronounced in smaller cities and those with lower levels of economic development. The findings of this study have significant implications for policymakers and business managers.