Environmental governance, innovation, and export in the global economy: Subnational evidence from an emerging country

This study examines how environmental governance shapes export performance in the context of economic globalization, drawing on subnational evidence from an export-oriented emerging economy. Using panel data from 63 Vietnamese provinces over the period 2018–2024 , the study employs fixed-effects estimations, lagged specifications, and bootstrapped structural equation modeling (SEM) mediation analysis to evaluate both the direct effects of environmental governance on export performance and its indirect effects through innovation. The results indicate that stricter environmental governance is associated with weaker provincial export performance both directly and indirectly through reduced innovation activity. Bootstrapped mediation analysis confirms a partial mediation mechanism, indicating that compliance costs outweigh potential innovation-enhancing effects. These findings can be understood in light of structural constraints associated with global value chain (GVC) integration. In cost-sensitive, lower-value segments, limited upgrading opportunities and tight margins constrain the ability of firms to offset regulatory pressures through innovation. These findings challenge the universalist interpretation of the Porter hypothesis and instead point to a structurally conditioned crowding-out dynamic in emerging economies. More broadly, the results suggest that the economic effects of environmental governance are contingent on production structures, highlighting the uneven nature of globalization and the persistence of trade asymmetries across countries. By linking environmental governance, innovation, and export performance within a subnational framework, this study provides new evidence on how regulatory pressures interact with structural constraints to shape development outcomes in the global economy.