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

How institutional factors that increase or reduce uncertainty can impact the effect of environmental investments (EIs) on green innovation (GI) deserves more investigation. In this study, we first examine the direct impact of EIs on GI. We further consider political uncertainty as a factor that increases uncertainty and marketization degree and environmental regulations as another two factors that reduce uncertainty, and examine the effects of these factors on EI and GI. Using key environmental cities in China covering the period 2003 to 2016 as the research sample, 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, political uncertainty can weaken the positive effect of EIs on GI. Furthermore, the association between EIs and GI varies with the intensity of environmental regulations, but does not vary with the degree of marketization. The positive effect of EIs on GI is more pronounced in cities with a higher intensity of environmental regulations. Overall, political uncertainty that increases uncertainty can weaken the positive effect of EIs on GI, whereas environmental regulations that decrease uncertainty can strengthen the promotion effect of EIs on GI.