The Dual Effect of Environmental Regulations’ Impact on Innovation——An Empirical Study Based on Dynamic Panel Data of Jiangsu Manufacturing

As an important strategic transformation of economic development,the relationship of environmental protection and technological innovation has always been a hot issue.This paper argues that environmental regulation not only has a direct impact on enterprises’ technological innovation,but also has an indirect impact through affecting FDI,firm size,human capital levels and other factors.Therefore,two-step GMM empirical method has been used on the panel data of 28 manufacturing industries in Jiangsu Province for years 2004—2011 to analyze the direct and indirect environmental regulation has on technological innovation.The results show that: there is a U-shaped dynamic relationship between environmental regulation and enterprise technology innovation.That is to say,offset effect will gradually transformed into compensation effect as the strength of environmental regulation become stronger,nevertheless,it has a positive compensation effect in the long term.FDI and enterprise’s scale has a significant role in promoting technological innovations,however,environment regulation will have a indirect on technological innovation by inhibiting FDI technology spillover and large scale enterprise effect.Both the level of human capital and corporate profit margins will have a positive on enterprise innovation regardless of the constraints of environmental regulation.The conclusion is that government should formulate appropriate environmental regulation measures and foreign investment policy,increase the support for RD funds,increase the level of human capital and take other measures to offset the negative impact of environmental regulation on technological innovation.