Academic Journal of Business & Management, 2026, 8(4); doi: 10.25236/AJBM.2026.080408.
Fan Wu
Business School, University of Shanghai for Science and Technology, Shanghai, China
Exploiting China’s 2018 Environmental Protection Tax Law as an exogenous shock, this paper applies a difference-in-differences (DID) model to 28,331 firm-year observations from listed manufacturing enterprises (2012–2024). We find that the environmental tax exerts an overall suppressive effect on green innovation. However, this reduction is entirely driven by a drop in low-quality green utility models, leaving high-quality green invention patents unaffected. Crucially, this crowding-out effect is strictly concentrated within state-owned enterprises (SOEs), where rigid political compliance forces a diversion of R&D funds toward short-term end-of-pipe treatments. In contrast, private firms successfully absorb the regulatory shock through market-oriented flexibility and operational optimization. Our results demonstrate that the Porter Hypothesis is deeply contingent upon corporate ownership structure, suggesting that policymakers must complement environmental taxation with targeted fiscal incentives to mitigate R&D crowding-out effects in SOEs.
Green innovation; Environmental Protection Tax Law; Manufacturing firms; Ownership heterogeneity; Difference-in-differences (DID)
Fan Wu. The Crowding-out Effect of Environmental Taxation on Green Innovation and Ownership Heterogeneity: DID Evidence from China's 2018 Environmental Protection Tax Law. Academic Journal of Business & Management (2026), Vol. 8, Issue 4: 61-66. https://doi.org/10.25236/AJBM.2026.080408.
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