How Does Green Industrial Policy Drive Sustained Green Innovation in Manufacturing Firms?

Drawing on China’s Green Factory initiative and data from Chinese A-share listed manufacturing firms in the Shanghai and Shenzhen from 2012 to 2024, this study employs a staggered difference-in-differences model to examine the effect of green industrial policy on firms’ persistent green innovation. The results show that green industrial policy significantly promotes sustained green innovation. Mechanism analyses indicate that green industrial policy significantly promotes both knowledge recombination creation and knowledge recombination reuse, and both types of knowledge recombination are significantly positively associated with firms’ persistent green innovation. Heterogeneity analyses show that the effect is more pronounced in regions with stricter environmental regulation, firms with lower levels of green innovation bubbles, and firms with broader innovation boundaries, while it is weaker under less stringent regulation, more severe innovation bubbles, or narrower innovation boundaries. These findings provide empirical evidence and policy implications for jointly advancing economic development and environmental protection.