Abstract We study the impact of policy venue specialization, the deliberate creation of domain-specific, expertise-intensive institutions, on environmental policy compliance. Leveraging a recent institutional reform in China, where municipal-level environmental courts were introduced to strengthen China’s environmental governance, we use a multi-period difference-in-differences approach to assess their influence on environmental misconduct among a key group of policy targets: local businesses. Our findings indicate that these specialized venues significantly deter environmental misconduct, with stronger effects observed among larger firms and those in less-polluting industries. Mechanism analyses further show that increases in firms’ innovation efforts, rather than enhanced government attention to environmental issues, help explain these observed compliance improvements, clarifying the causal pathways through which venue specialization enhances policy compliance. By linking institutional design directly to compliance outcomes, we move beyond the conventional process-oriented focus of policy venue research and demonstrate how new, specialized institutions affect governance outcomes. Additionally, our study offers new insights into the distinctive institutional capacities and policy impacts of judicial venues, complementing prior research that has primarily examined executive, legislative, or hybrid collaborative policy venues.
Yuhao Ba (Tue,) studied this question.