Innovation Element Agglomeration and Enterprise Green Innovation: Mechanism Analysis Based on Cost Effect and Factor Matching Effect

Innovation elements are underexplored in terms of their role and mechanisms in driving corporate innovation. Using panel data for Chinese A-share listed firms from 2011 to 2023, this study examines how city-level innovation element agglomeration affects firm-level green innovation. The results show that agglomeration significantly promotes firms’ green innovation, a finding that remains robust across multiple robustness checks. Mechanism analysis reveals two channels: the cost effect, which lowers debt financing costs and institutional transaction costs; and the factor-matching effect, which alleviates factor market distortions and credit misallocation. Heterogeneity analysis further indicates that the effect is stronger for labor-intensive firms, firms with high financing constraints, and firms located in key environmental protection cities and innovative cities. This study extends the literature on the spatial allocation of innovation elements and offers practical implications for optimizing regional policies to foster green innovation and sustainable development.