Global Value Chain Participation and Green Innovation: Evidence from Chinese Listed Firms

Green innovation is one of the most important approaches to prevent environmental pollution and foster sustainable development. Embedded in the global production networks, manufacturing firms have been found not only to be the main drivers of innovation but also the main polluters in developing countries. However, relatively few studies have systematically considered the effect of global value chain (GVC) participation on green innovation in the context of developing countries. By using a panel dataset of Chinese listed manufacturing firms, this study conducts panel data fixed-effect analyses and uses the instrumental variable two-stage least square model to investigate the effect of GVC participation on firms’ green innovation performance. The results show that increased GVC participation leads to improved green innovation performance of Chinese firms. Meanwhile, further heterogeneity analyses show that the impact of GVC participation on green innovation is more pronounced for firms with greater financial constraints, state-owned firms and firms in labor- or pollution-intensive industries, located in the eastern regions of China. Therefore, this study sheds light on the implication that actively participating in GVC is the key to promoting sustainable growth when facing the need for transformation in developing countries.