Impact of eco-city construction on firm innovation in the case of China

Song, Ziyu; Xuan, Yang; Ren, Shuming

Impact of eco-city construction on firm innovation in the case of China

2021

Song, Ziyu | Xuan, Yang | Ren, Shuming

More and more scholars have paid attention to the importance of coordinated development between ecological environmental protection and economy. Eco-city construction has been implemented in many countries in recent years; however, quantitative research on its economic impact has only started. This study establishes a theoretical model of the impact of eco-city construction on a firm’s research and development (R&D) investment. The numerical simulation results show that eco-city construction promotes a firm’s R&D investment and long-term earnings from two aspects: (1) macro policies increase a firm’s exogenous uncertainty and (2) ecological capital enhances a firm’s business conditions. The empirical study matches the microscopic data of 115 cities and 2612 listed firms in China from 2008 to 2017, and results show that eco-city construction has a significant positive impact on firm innovation input and output. Further research shows that this positive impact mainly comes from ecological environment and ecological economy, and there is regional heterogeneity. For the first time, this study affirms the positive role of eco-city construction from the perspective of firm innovation activities at the micro level. It provides strong evidence for the government to realise the sustainable development of firms by accelerating eco-city construction.

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