Could environmental regulation and R&D tax incentives affect green product innovation?

Abstract Green product innovation represented by information and communication technology (ICT) refers to an environmental production mode with innovation as the main carrier. As a key means to achieve the coordinated development of environmental protection and economic development, green product innovation is still in the lead-in period in China; since it is difficult to achieve rapid development only by relying on market forces, it needs government intervention and regulation. To guide the development of the green product innovation industry, this study analyzes the effect of environmental regulation and R&D tax incentives on green product innovation from a disciplinary and incentive perspective. Data from 30 regions in China from 2009 to 2017 are used. First, a panel model is proposed for the analysis of the entire country to determine the relationships among environmental regulation, R&D tax preferential policies, and green product innovation. Due to the regional differences in industrial structure and economic development level in the various regions of China, to enhance the accuracy of the research results, the inflection points of environmental regulations in different provinces are analyzed. The research results show a U-shaped relationship between environmental regulation and green product innovation, that is, given the increasing intensity of environmental regulation, its effect will gradually change from inhibition to promotion. Currently, most provinces in China are close to the inflection point of environmental regulation, meaning the regulation level needs to be further improved. Further, R&D tax incentives play a significant role in promoting green product innovation. The results not only identify the determinants of green product innovation but also provide a theoretical and decision-making framework for the industrial development and promotion of green product innovation in China.