Does public procurement promote renewable energy innovation? Firm-level evidence from China

Public procurement has been an indispensable demand-side instrument to drive innovation, but there is no evidence on whether public procurement affects renewable energy innovation. This paper utilizes patent counts in renewable energy technologies and public procurement data to explore the effect of public procurement on firm renewable energy innovation based on the two-way fixed effect (TWFE) model. The main finding indicates that public procurement can result in a significant and robust improvement in renewable energy innovation. For every 1% increase in public procurement, renewable energy technological innovation will ascend by 2.12%. Furthermore, mechanisms tests show that the positive effect is achieved by elevating capacity utilization, attenuating financing constraints, and ameliorating environmental, social, and governance (ESG) performance. Heterogeneous analysis suggests the stimulus impacts appear more pronounced for enterprises without political connections, with fewer knowledge stocks, in dirty sectors, and regions with higher marketization. This study provides novel insights into the critical role of the government as a customer in advancing renewable energy innovation and offers instructive implications for economic and environmental sustainability.