Does environmental regulation repress the international R&D spillover effect? Evidence from China

The inconsistent direction between environmental regulation and technological progress is receiving increasing attention, but scholars have neglected the relationship between the two in the open economy. Against this background and based on the panel data of 30 provinces in China from 2003 to 2015, we examined the effect of environmental regulation on the international research and development (R&D) spillover effect and its regional differences in three economic regions: The Bohai Rim, Pan-Yangtze River Delta, and Pan-Pearl River Delta economic regions. The results show that (1) at China's macro level, and at that of the three economic regions, the level of environmental regulation and international R&D spillover from import trade or foreign direct investment channels show an inverted N relationship; that is, in all provinces the weak environmental regulation initially inhibited the international technology spillover. However, as the intensity of environmental regulation increased, the level of international R&D spillovers continually rose, but overly harsh environmental regulation was not conducive to the overflow of international technology; (2) the adoption of different environmental regulations will affect the international R&D spillover effect and the inverted N relationship of environmental regulation, thus changing the inflection point of environmental regulation; and (3) currently, the level of environmental regulation is relatively low, as most provinces have not yet broken through the first turning point of the inverted N, and only a few provinces are within the rising stage of the inverted N curve. This paper provides corresponding policy suggestions according to the above conclusions.