The impact of environmental investments on green innovation: An integration of factors that increase or decrease uncertainty

Abstract How institutional factors that increase or decrease uncertainty can influence the effect of environmental investments (EIs) on green innovation (GI) deserves further investigation. In this study, we first examine the direct impact of EIs on GI. Moreover, we consider political uncertainty (PU) as a factor that increases uncertainty and consider marketization degree (MD) and environmental regulations (ERs) as two other factors that decrease uncertainty; then, we examine the effects of these factors on EIs and GI. Using key environmental cities in China covering the period from 2003 to 2016 as the research sample, the empirical results indicate that EIs can have a positive effect on GI and two different types of GI (green invention and green utility). In addition, PU can weaken the positive effect of EIs on GI. Furthermore, the association between EIs and GI varies with the intensity of ERs but does not vary with MD. The positive effect of EIs on GI is more pronounced in cities with a higher intensity of ERs. Overall, PU that increases uncertainty can weaken the positive effect of EIs on GI, whereas ERs that decrease uncertainty can strengthen the promotion effect of EIs on GI.