Environmental subsidies and green innovation: the role of environmental regulation and chief executive officer green background.

The extent to which firms can emerge as green innovators driving the eco-friendly transformation of an economy largely hinges on the efficacy of government policies in incentivizing firms to innovate in a sustainable manner. Based on the data of 825 listed firms in China, this study surveys how environmental subsidies affect green innovations for the firms and examines the moderating effect of these subsidies on firm scale expansion and green innovations. It is found that environmental subsidies significantly stimulate green innovation, and substantial green innovations and green management innovations contribute to the firms' expansion through the innovation effect. Second, environmental regulation positively moderates the relationship between environmental subsidies and both substantive and strategic green innovation. Chief executive officer green background positively moderates the relationship between environmental subsidies and different types of green innovations. Third, firms with environmental subsidies are more likely to opt for a "quality-focused" green innovation strategy. The conclusions provide policy recommendations aimed at improving the effectiveness of subsidy policies as well as accelerating the firm's green transition. [ABSTRACT FROM AUTHOR]