Catalyst or compliance burden: the effects of green standard formulation on corporate green innovation

As an emerging regulatory instrument, green standard-setting has become an integral component of the contemporary environmental governance framework. However, empirical evidence regarding its microeconomic effects remains limited. Constructing a novel measure of green standards via classification codes and measuring industry exposure through natural language processing techniques, we investigate the impact of green standards on corporate green innovation using a panel of Chinese A-share listed firms from 2007 to 2024. We document a positive and significant relationship between green standards and corporate green innovation. Mechanism analyses suggest that compliance cost constraints, technological trajectory guidance, and green signalling serve as the key channels. Furthermore, our evidence alleviates concerns about strategic innovation catering, and suggests that green standards are associated with substantive green innovation. Heterogeneity analyses show stronger responses among non-SOEs, firms with overseas-experienced CEOs, digitally transformed firms, heavily polluting firms, and firms in regions with stricter environmental regulation and stronger intellectual property protection. Overall, our findings offer novel insights into the literature on environmental policy instruments and yield practical implications for optimizing the environmental governance system.