The Number Proliferation Paradox of Environmental Governance Pilots: From Fueling to Curbing Green Innovation Bubbles

Environmental Governance Pilots (EGP) have become an important policy instrument for China's green transition. Their quantitative expansion, however, may give rise to green innovation bubbles, characterized by an increase in patent quantity without a corresponding improvement in innovation quality. Using data on 19 categories of EGP issued by the Chinese government between 2008 and 2022, this study examines how the expansion in the number of EGP affects firms' green innovation bubbles. Interestingly, the results reveal an inverted U‐shaped relationship. In the early stage, policy incentives stimulate the growth of green innovation bubbles. Once a critical threshold is exceeded, strengthened regulation and resource dilution jointly contribute to their decline. Mechanism analyses further show that green finance, as an incentive mechanism, plays an inverted U‐shaped mediating role between the number of EGP and firms' green innovation bubbles. In contrast, environmental regulatory intensity, as a constraint mechanism, exerts a U‐shaped mediating effect. By shifting the focus from whether pilot programs exist to how their quantitative expansion affects firm behavior, this study provides implications for the efficient management of EGP expansion and the allocation of policy resources.