Does distorted allocation of capital factors inhibit green technology innovation in Chinese cities? An empirical analysis based on spatial effect

Distorted allocation of capital factors will lead to the loss of capital market-based soil as the background support for green technology innovation, which will not be able to climb up the value chain and eventually become an economic "colony." This study empirically investigates the relationship between distorted capital factor allocation and green technology innovation using data from 2005 to 2018 for prefecture-level cities in China. The empirical results show that the distortion of capital factor allocation not only has a significant inhibiting effect on green technology innovation in the city, but also hinders the development of green technology innovation in neighboring cities. Mechanism test analysis suggests that there is negative impact via generating mismatch, crowding out, and rent-seeking effects. Further research shows that the effect of distorted capital factor allocation on urban green technology innovation is more influential in the eastern and western regions. The conclusions of this study have important practical significance for optimizing the rational allocation of factor resources, promoting green technology innovation, and achieving high-quality economic growth.