Environmental regulations and enterprises innovation performance: the role of R&D investments and political connections

The purpose of this paper is to investigate the nonlinear relationship between environmental regulations and enterprise innovation performance, as well as pay attention to the boundary condition of political connections. The data we applied in this paper are listed Chinese industrial firms during 2012–2017 to test the effect of environmental regulations on enterprises innovation performance, the moderating effect of political connections and the mediating effect of Research and Development (R&D) investments. The results show that (1) environmental regulations have a U-shaped relationship with enterprises innovation performance in which the R&D investments play a mediating role. (2) Political connections negatively moderate the relationship between environmental regulations and enterprises innovation performance via R&D investments. Except political connections’ moderating effect on the relationship between environmental regulations and R&D investments, (1) & (2) are demonstrated in a much more apparent manner among non-state-owned enterprises than that among state-owned enterprises. We also examined hypotheses among different regions of China in our studies.