Biodiversity regulation and green innovation: evaluating the porter effect

Abstract We demonstrate that corporate green innovation undergoes a structural transformation under China’s Green Shield Program (GSP), a biodiversity conservation initiative integrating super-hierarchical supervision with multi-party co-governance. Using quasi-experimental evidence from difference-in-differences estimation, our analysis reveals that the GSP significantly enhances corporate green innovation performance and generates spatial spillover effects across nature reserves of different administrative levels, thereby compensating for the inherent limitations of conventional environmental regulation. Dynamic effects demonstrate that firms shift from passive, strategic innovation in the early stages to active, substantive innovation later on. Mechanism tests identify three transmission channels: improved environmental information disclosure, increased ecological awareness among management and reduced agency costs. Heterogeneity analysis indicates stronger effects in state-owned enterprises and industries with limited market competition. Our findings enrich the environmental decentralization theory through biodiversity policy applications and support the Porter hypothesis with practical implications for implementing the Kunming-Montreal Global Biodiversity Framework.