Environmental Regulation and Enterprise Innovation: A Review

Abstract The impact of environmental regulation on enterprise innovation is closely related to the competitiveness of the enterprise and sustainable development of the regional economy, but existing research does not provide a consistent view. This paper summarizes the impacts of environmental regulation on enterprise innovation from the perspectives of technological innovation, product innovation, system innovation and ecological innovation. We find that the impacts of environmental regulation on enterprise innovation behaviour are complex, and that the impacts can be reflected together by the four aspects above and even by their interaction. Moreover, the impacts are not limited to the creation of new technologies, products, and systems but also include their adoption and application. In particular, whether the Porter hypothesis is true and which versions of the Porter hypothesis environmental regulation causes in enterprise innovation depend on enterprise characteristics, means of environmental regulation, and enterprises' strategic behaviours in an enterprise ecosystem. Finally, we propose five potential research directions: quantifying the degree of enterprise innovation caused by environmental regulation, the impacts of environmental regulation on sustainable economic development from an enterprise ecosystem perspective, the impacts of enterprise innovation on environmental regulation, the role of enterprise initiative in the relationship between environmental regulation and enterprise innovation, and social security issues and the integration of eliminated enterprises resulting from environmental regulation.