Path dependence in environment-related innovation: evidence from listed firms in China

This paper studies the path dependence effect in corporate innovation based on the patent data of Chinese listed firms. The results provide robust evidence of the path dependence in technology innovation. The accumulated stock of brown patents reduces the ratio of green patents to total patents newly granted, thus inhibiting green structural changes in innovation. The accumulated stock of green patents increases the ratio of green patents in total patents granted, promoting structural change towards green innovation. The path dependence effect exists in both green inventions and green utility model patents. The heterogeneity analysis shows that both brown and green patent stocks of heavy polluting firms have a weaker effect on the ratio of green inventions than non-heavy polluting firms. The negative path dependence effect of brown patents on green innovation is stronger in firms with large scale, state ownership, and a high level of environmental regulation. However, the negative path dependence effects on green innovation can be alleviated for firms with superior environmental and financial performance. This suggests that the government has to create economic incentives to break the path dependence and encourage firms to engage in green innovation.