Government Policy, Corporate Social Responsibility and Corporate Innovation Evidence from China

Abstract

The conventional literature on the regional polarisation of innovation in China suggests that based on the granting and application of patents the Coastal region is at the forefront of innovation in China. However, the results of this paper based on cement firm capitalisation and their published CSR reports suggests that market capitalisation and access to financial resources is a more significant driver of innovation to reduce environmental air pollution than government laws, regulations or CSR guidelines. This finding does not contradict with endogenous economic growth theory which is based on innovation which asserts the importance of government intervention. Rather, the results of this paper suggests that government intervention should not be based solely on laws, regulations and CSR guidelines on environmental air pollution but that these should be aligned with subsidies to cement firms to help them to fund innovation. However, the government would also be able to fund research institutes specifically linked to the cement industry.

Keywords: Cement industry, China, CSR, Government Regulations, Innovation.