Firms' GVC positioning and corporate environmental performance: Micro evidence from China.

• The relationship of Firms' GVC positioning and CEP is investigated for the first time. • We find a right-side smile curve between firms' GVC positioning and CEP. • The improvement of CEP could be driven by firms' downstream climbing in GVC. • The demand diversity brought about by consumption-downstream GVC positioning promotes CEP. • The higher the export market efficiency, the larger the environmental improvement effect is. How firms' GVC positioning affects their environmental performance is an interesting but under-researched issue. This paper explores the relationship between GVC positioning and environmental performance from the firm level for the first time. Based on the Chinese Industrial Enterprise Pollution Emission Database from 2001 to 2013 combined with OECD's TiVA and China Customs databases, this paper identifies the existence of a right-side smile curve between firms' GVC positioning and Corporate Environmental Performance (CEP, represented by firms' SO2 emission intensity) among firms in developed regions, supported by industrial policies and with large scale, implying that the improvement of CEP could be driven by firms' downstream climbing in GVC. Mechanism analysis reveals that the demand diversity brought about by consumption-downstream GVC positioning expands firms' imported intermediate goods and enhances firms' innovation to promote CEP. The environmental improvement effects are more substantial when the export market is more efficient. [ABSTRACT FROM AUTHOR]