1. Introduction
Green technology innovation is a major pillar of China’s implementation of the UN SDGs, which aim to guide the transition toward sustainable development paths by thoroughly addressing the three dimensions of development (i.e., social, economic and environmental) in an integrated manner, between 2015 and 2030. Simultaneously, against the backdrop of the severe carbon emission reduction responsibilities and targets faced by countries across the world, including China, green technology innovation could reduce carbon emissions by limiting carbon emission reduction costs [
1] and improving carbon emission reduction efficiency [
2], thereby achieving green and sustainable development. As the main bodies involved with green development, corporations play key roles in global sustainable development via their enthusiasm for innovative green technologies. In order to maximize the social value of corporations, scholars have been actively exploring the influencing factors for improving regional green technology innovation, providing feasible suggestions for policymakers to help to achieve the sustainable development of enterprises and society, and even sustainable global development.
Previous studies have investigated two major influencing factors on how to improve corporate green technology innovation: internal corporate factors and external governments’ fiscal systems and environmental policies. Internal corporate factors, including corporate life cycles [
3], corporate scales [
4] and internal corporate management [
5], have been found to affect corporate green technology innovation. As far as government environmental policy is concerned, provincial governments first play pivotal roles, and are the backbones of promoting regional innovation [
6], because they are responsible for implementing green innovation plans designed by the central government. Secondly, environmental protection tax [
7,
8] and carbon emissions trading [
9] have been found to be positively associated with corporate green technology innovation. Thirdly, financial system reforms and taxation systems inevitably affect the behavior of provincial governments in terms of strategic corporate choice and, in turn, corporate green technology innovation [
10]. Fiscal decentralization remains a fiscal system in which the central government uses fiscal revenue and expenditure to improve the quality of the natural environment. In essence, fiscal decentralization aims to hand over fiscal and financial power to provincial governments, to enable them to be responsible for sustainable economic decision-making [
2,
11].
Based on the above, there exist three potential research gaps in the current studies on green technology innovation. Firstly, limited attention has been paid to the role of fiscal decentralization on green technology innovation, especially from the corporate level. Secondly, current studies have shown contradictory evidence on the relationship between fiscal decentralization and green technology innovation. Some have documented that fiscal decentralization can promote green development by urging provincial governments to tighten environmental controls and promote environmental protection [
12], while others have found that fiscal decentralization can inhibit green development because provincial governments focus on economic GDP development while ignoring environmental protection and green innovation efficiency [
13]. Thirdly, the boundary conditions of taxation efforts on the relationship between fiscal decentralization and corporate green technology innovation have not been explored, neither their heterogeneity effects. Thus, these divergent results, and the absence of a moderating context and heterogeneity effects under which fiscal decentralization affects green innovation, make further research desirable.
To address these research gaps, we first drew the new structure economy theory (NSE) and “Tiebout hypothesis” to empirically investigate how fiscal decentralization influences corporate green technology innovation. Furthermore, we examined the moderating effect of taxation efforts on the relationship between these two variables, and tested whether there are potential heterogeneity effects. There are reasons why taxation could serve as a significantly conditional variable. Taxation efforts remain the way by which provincial governments adjust their fiscal revenue, which affects the behavior of provincial governments in terms of formulating and implementing regional innovation strategies. As the tax legislative power of the central government is highly unified and provincial governments cannot change tax rates, the fiscal decentralization system offers provincial governments a chance to change their taxation collection and management approaches [
14]. With the decentralization of central finance, provincial governments often participate in tax competition by providing more tax incentives, such as reducing taxation efforts [
15]. Tax competition via reducing taxation efforts aggravates environmental pollution because it can reduce the social levels of public goods that are provided by provincial governments [
16]. Obviously, reducing taxation efforts increases tax competition, which leads to a mismatch between provincial innovation factors, including talents and capital [
17]. In this way, reducing the taxation efforts of provincial governments leads to a loss of regional innovation factors. The literature concludes that taxation efforts can affect regional development by affecting the behavior of provincial governments. Therefore, it is necessary to explore whether there are synergistic effects of taxation efforts and fiscal decentralization on corporate green technology innovation, and to investigate ways to improve the effects from fiscal systems and taxation management systems of provincial governments.
Accordingly, this paper has three research questions: (1) How does fiscal decentralization influence corporate green technology innovation, and are there potential heterogeneity effects? (2) Do taxation efforts moderate the relationship between fiscal decentralization and corporate green technology? (3) What are the boundaries of the moderating effect? To answer these questions, we reviewed the existing literature, proposed research assumptions and developed our theoretical framework. Our main arguments are that fiscal decentralization is positively associated with corporate green technology innovation; the synergistic effects of fiscal decentralization and taxation efforts play positive roles in promoting corporate green technology innovation; and the synergistic effects are more pronounced when corporates are from the eastern regions, of non-SOEs and the manufacturing industry, respectively. To test our hypotheses, we collected firm-level unbalanced panel data, and incorporated firm, year and year × industry fixed effects, aiming to mitigate possible endogeneity problems and confounding factors of time-invariant, firm-specific characteristics and time trends, as well as industry-specific changes over time.
The novelties of this research are manifested as follows: firstly, this paper centered on green technology innovation; unlike previous works that paid attention to regional dimensions, our research focused on green technology innovation at the corporate level which was constructed on the basis of data of the WIPO. Secondly, this paper introduced the new structural economic theory into our theoretical framework to explain the influential mechanism of fiscal decentralization on corporate green technology innovation. According to this theory, when provincial governments enjoy a higher degree of fiscal decentralization, they have stronger responsibility for formulating and implementing development strategies with comparative advantages that incorporate green innovation development, recruit environmentally friendly industries and enterprises, and support green technology innovation. Thirdly, our study uncovered an important boundary condition of taxation efforts on our main effect. Taxation efforts can affect the behavior of provincial governments, which serves as a reasonable moderator to develop our theoretical framework.
Thus, this study contributes to previous studies in several aspects. Firstly, this paper extended the research stream in regional green technology innovation. We explored the role of fiscal decentralization at the macro level on corporate green technology innovation at the micro level, and we introduced a new perspective of new structural economic theory to investigate influential mechanisms. Secondly, we enriched the research on the main effect by exploring an important regional contingency—taxation efforts. Overall, our findings offer novel insights for policymakers to exert synergistic effects of a fiscal decentralization system and tax collection and management systems, to boost corporate green technology innovation.
The rest of the paper is structured as follows: the second section of this paper presents a review of the relevant literature; the third section introduces the theoretical analysis, research assumptions and develops our theoretical framework; the fourth section introduces the materials and methods; the fifth section presents the regression results and robustness checks; the sixth section gives the conclusions and recommendations, and presents limitations and areas for future study.
6. Conclusions and Policy Recommendations
6.1. Conclusions
This paper explored the effects of fiscal decentralization on corporate green technology innovation and the moderating effects of taxation efforts on the relationship, using a fixed effects model that was based on new structural economics. We found the following: (1) fiscal decentralization played a significant role in promoting corporate green technology innovation, on the whole, from the perspective of new structural economics and the “Tiebout hypothesis”; (2) based on taxation efforts affecting the behaviors of provincial governments, this study investigated the moderating effects of taxation efforts on the relationship between fiscal decentralization and corporate green technology innovation; we found that the synergy effects of fiscal decentralization and taxation efforts were strongly positive, implying a substantial promotion of corporate green technology innovation; (3) to further explore the synergy effects of fiscal decentralization and taxation efforts, this paper analyzed heterogeneity based on regional economic development, corporate property rights and heterogeneity of industry. This study found that the synergistic effects of fiscal decentralization and taxation efforts were more significant in promoting corporate green technology innovation in eastern China, in non-SOEs, and in manufacturing corporations.
6.2. Policy Recommendations
The main findings of this paper imply several policy recommendations. Firstly, provincial governments should be granted more fiscal autonomy to further reform the fiscal decentralization system of the central government. When increased fiscal autonomy is secured, provincial governments tend to be more responsible in formulating and implementing green development strategies. Provincial governments can also facilitate the flow and allocation of funds toward greener and more environmentally friendly areas, recruit environmentally friendly industries and enterprises, and support green technology innovation projects, which contribute to increasing corporate green technology innovation.
Secondly, taxation efforts and tax competition strategy should be optimized and adjusted by provincial governments, in order to promote long-term effects of fiscal decentralization on corporate green technology innovation. The following necessary measures include: (1) as provincial tax revenue increases, provincial governments should increase spending on protecting the local environment, and on supporting green innovation, and allocate more funds toward environmental protection and green innovation development areas with micro-corporations that promote the long-term development of environmental protection and the economy; (2) provincial governments should reduce or avoid competitive taxation practices. On the one hand, taxation efforts should be increased to raise the entry thresholds for polluting corporations; on the other hand, provincial governments should increase their taxation efforts on the basis of a series of incentives, such as tax concessions and financial subsidies for specific green development areas where there are corporations with “innovative and environmentally friendly” values and other sustainable development approaches.
Thirdly, the central government should formulate differentiated fiscal policies that consider the effects of heterogeneity factors. In the eastern region, the central government should formulate supportive regulatory and assessment measures, while increasing the financial autonomy of provincial governments to ensure that provincial governments make use of the “dividends” from fiscal decentralization. In the central and western regions, the central government should improve the innovation management capacity of provincial governments and strengthen the innovation awareness of corporations, in order to prevent fiscal decentralization from inhibiting corporate green technology innovation. Furthermore, provincial governments should formulate targeted plans for SOEs and non-manufacturing corporations to give full play to the green functions of fiscal decentralization, under the conditions of different ownership and industries. For instance, it is imperative to alleviate the current difficulties and financial constraints regarding green financing for private corporations.
6.3. Limitation and Future Studies
This paper still has some limitations, which makes future study possible. First, we only used the quantity of green patents to indicate the level of corporate green technology innovation; this ignored the fact that the innovation activities of individual enterprises are the by-products of their pursuit to maximize their own economic interests. However, the level of corporate green technology innovation included not only the quantity of green patents, but also the quality of green patents under the environmental responsibility system. Future studies could consider using the quality of green patents to indicate corporate green technology innovation, which would help find the root causes of the low levels of corporate green technology innovation occurring in China. Second, this paper only centered on the moderating effect of taxation efforts from provincial governments. Future research could improve our paper by exploring other boundary conditions, including green taxation system or environmental regulation, and so on, either from provincial governments or city governments.