Spatial impact of environmental regulation on firm entry: Empirical evidence from Chinese firm registration data

Facing severe environmental challenges and a rapidly changing economic landscape, it is important to deeply analyze the specific impact of environmental regulation on firm entry. This paper used data on enterprise registrations from 279 Chinese cities between 2007 and 2020. We employed spatial econometric models to study the spatial impact of environmental regulation on firm entry. The results show that environmental regulation has a significant direct inhibitory effect on firm entry, especially more pronounced for manufacturing firms. At the same time, environmental regulation also has spatial spillover effects, influencing firm entry decisions in neighboring areas. Furthermore, it is found that environmental regulation improves environmental quality, which in turn inhibits the entry of manufacturing firms while attracting service firms. Based on these findings, policymakers need to fully consider the impact of environmental regulations on the entry of manufacturing and service firms, as well as the spatial spillover effects on firm entry in neighboring areas. Moreover, environmental regulation policies should be adjusted according to the specific development situations of cities. This will help achieve a coordinated development of environmental protection and economic growth.