Policy instruments and green innovation: Evidence and implications for corporate performance

Green innovation is a pivotal means of achieving economic growth while mitigating environmental harm, and encouraging green innovation is a goal of policymakers. This paper systematically reviews the literature on the impact of diverse policy instruments on green innovation and corporate performance. We derive three main conclusions. (a) The majority of studies demonstrate that implementing policy instruments (including demandpull policies, technology-push policies, and soft and systemic instruments) positively promotes the growth of green patents. (b) The development of green innovation involves passive diffusion, influenced by domestic policy interventions, international spillovers, and inter-firm knowledge flow. (c) The impact of environmental regulation and green innovation on firm performance is intricate, with the mediating role of green innovation remaining ambiguous. Finally, the paper concludes by highlighting potential new research directions in green innovation.