International Journal of

Environmental Research
and Public Health

Article
Global Value Chain Participation and Green Innovation:
Evidence from Chinese Listed Firms
Shuang Meng 1 , Huan Yan 2 and Jiajie Yu 3, *

1 School of International Trade and Economics, Central University of Finance and Economics,
Beijing 100081, China; mengshuang@cufe.edu.cn
2 Renmin Business School, Renmin University of China, Beijing 100872, China; yanhuan56@ruc.edu.cn
3 Business School, Beijing Normal University, Beijing 100875, China
* Correspondence: yujiajie@bnu.edu.cn

Abstract: Green innovation is one of the most important approaches to prevent environmental
pollution and foster sustainable development. Embedded in the global production networks, man-
ufacturing firms have been found not only to be the main drivers of innovation but also the main
polluters in developing countries. However, relatively few studies have systematically considered
the effect of global value chain (GVC) participation on green innovation in the context of developing
countries. By using a panel dataset of Chinese listed manufacturing firms, this study conducts
panel data fixed-effect analyses and uses the instrumental variable two-stage least square model
to investigate the effect of GVC participation on firms’ green innovation performance. The results
show that increased GVC participation leads to improved green innovation performance of Chinese
firms. Meanwhile, further heterogeneity analyses show that the impact of GVC participation on green
innovation is more pronounced for firms with greater financial constraints, state-owned firms and
firms in labor- or pollution-intensive industries, located in the eastern regions of China. Therefore,
this study sheds light on the implication that actively participating in GVC is the key to promoting
Citation: Meng, S.; Yan, H.; Yu, J. sustainable growth when facing the need for transformation in developing countries.
Global Value Chain Participation and
Green Innovation: Evidence from Keywords: global value chain; GVC participation; green innovation; developing countries; China
Chinese Listed Firms. Int. J. Environ.
Res. Public Health 2022, 19, 8403.
https://doi.org/10.3390/
ijerph19148403 1. Introduction
Academic Editors: Junzo Watada With the acceleration of economic globalization and international trade liberalization,
and Wentao Gu the manufacturing firms in developing countries have realized transformation and up-
Received: 22 May 2022
grading by participating in global value chain (GVC), which becomes an indispensable
Accepted: 7 July 2022
economic development paradigm. However, the longstanding conflict between economic
Published: 9 July 2022
development and environmental protection poses a challenge to sustainable development
focusing on emission reduction and energy conservation. In recent years, Chinese manu-
Publisher’s Note: MDPI stays neutral
facturing firms have not only contributed to rapid economic development but have also
with regard to jurisdictional claims in
severely polluted the natural environment. Meanwhile, green innovation that integrates
published maps and institutional affil-
technological progress and green development is an important indicator that reflects sus-
iations.
tainable development. In view of the fact that the environmental agenda has become a
crucial and inevitable topic, whether GVC participation plays a role in affecting green
innovation performance and environmental outcomes is worth investigating.
Copyright: © 2022 by the authors.
The emergence of GVC has considerably transformed and modernized the global
Licensee MDPI, Basel, Switzerland. manufacturing industry and international trade. Participation in GVC particularly helps
This article is an open access article firms in developing countries improve their productivities and competencies [1]. However,
distributed under the terms and the issues of energy consumption and the environment, as well as GVC participation, have
conditions of the Creative Commons garnered increased attention both academically and practically in recent years. Evidence
Attribution (CC BY) license (https:// suggests that GVC has resulted in the transfer of carbon emissions and pollutant emissions
creativecommons.org/licenses/by/ from industrialized countries to developing countries [2]. There is an urgent need to
4.0/). resolve the conflict between economic development and environmental protection. Green

Int. J. Environ. Res. Public Health 2022, 19, 8403. https://doi.org/10.3390/ijerph19148403 https://www.mdpi.com/journal/ijerph
Int. J. Environ. Res. Public Health 2022, 19, 8403 2 of 17

innovation has recently attracted much attention, as it provides new technologies, goods,
services and production processes that can help prevent environmental pollution and foster
sustainable development [3]. In the context of China, manufacturing firms are not only
the main drivers of innovation and development but also the main polluters during the
development process. Therefore, green innovation within manufacturing firms facilitates
the environmental improvement and industrial transformation of the economy.
There remains a research gap regarding how GVC participation affects enterprises’
green innovation performance, although there are several studies focusing on GVC partici-
pation and industrial upgrading or environmental issues. To address this research gap, we
analyze a panel dataset of Chinese listed manufacturing firms from 2008 to 2014. Combin-
ing this with China’s customs database, we refer to the recent literature and calculate the
GVC participation index for each firm [4]. The empirical analysis is then carried out using
ordinary least squares and two-stage least squares (2SLS) estimations. Finally, our findings
also highlight important heterogeneity in how GVC participation affects various types of
firms’ green innovation.
The main contributions of this study are threefold. First, this paper sheds light on the
relationship between GVC participation and green innovation in the context of developing
countries. We seek to unpack the underlying mechanism through which the level of GVC
participation affects green innovation performance. Specifically, GVC participation can
introduce advanced green production technologies and increase the absorptive capacity
of technology spillovers among various firms, which in turn boosts green innovation.
Second, this study contributes to the existing literature by examining the environmental
consequences of participating in GVC. Therefore, it provides new insights into the inter-
relationship between economic globalization, environmental protection and sustainable
growth. Our findings reinforce the important role of GVC participation in shaping the
environmental outcomes. In addition, we employ an instrumental variable (IV) approach
to address potential endogeneity issues and establish a cause–effect relationship in the
empirical study. Third, this study explores whether heterogeneity across firms, industries
and regions influences the impacts of GVC participation on green innovation. The hetero-
geneity analysis allows policymakers to utilize targeted policies to enhance manufacturing
firms’ capability of green innovation and sustainable development. It provides a useful tool
for future research investigating longstanding conflicts between economic development
and environmental protection, as well as the means to leverage green innovation and
environmental performance in developing countries in the era of globalization.
The remainder of the paper is organized as follows. Section 2 provides the literature
review. Section 3 describes the data and methodology, including data sources, measure-
ments of variables, stylized facts and model specifications. Section 4 presents the results,
including baseline findings and robustness checks. Section 5 shows the heterogeneity
analysis based on firm, industry and region level. Section 6 illustrates the implications and
limitations of the research. Finally, Section 7 concludes the paper.

2. Literature Review
Two strands of literature are related to this study: (a) GVC participation and industrial
upgrading and (b) GVC participation and environmental issues in developing countries.
Previous research has demonstrated the significance of GVC participation in the eco-
nomic growth and industrial upgrading of developing countries [5–7]. There is a growing
consensus that the emergence of GVC represents a remarkable opportunity for promoting
the ongoing transformations in developing countries [8,9]. GVC provides firms in devel-
oping countries with increased access to international markets, higher-quality inputs and
technology transfer, which can give rise to research and development (R&D) spillovers,
productivity improvements and growth [10,11]. Specifically, increased GVC participation
allows firms to effectively and efficiently utilize the diverse knowledge they could acquire
from their GVC partners, which can be considered as one of the most valuable resources in
upgrading their technology and strengthening innovation capacity [12–14]. Meanwhile,
Int. J. Environ. Res. Public Health 2022, 19, 8403 3 of 17

inward-sourcing capability is critical for technical upgrade in GVC for emerging-economy

firms [15]. It has been well documented in the literature that GVC participation boosts pro-
ductivity and innovation efficiency [1], provides opportunities to modernize the industrial
structure [16] and results in economic upgrading [17] for developing countries. Moreover,
it is found that the business environment and foreign direct investment (FDI) significantly
promote the status elevation on GVC, especially for labor-intensive industries [18]. The
existing literature has suggested different channels through which GVC participation in-
fluences industrial upgrading and economic development of developing countries. The
key underlying mechanisms include improved access to global markets, increased avail-
ability and quality of imported inputs, advanced technology and knowledge transfers and
enhanced innovation capacity. Nevertheless, all of these major transmission channels are
essentially theoretical, and the materialization of the above-mentioned theoretical effects is
still uncertain. Hence, empirical studies are of vital importance to test the theoretical pre-
dictions in the context of developing countries. In addition, investigating the relationship
between GVC participation and industrial upgrading in China could provide lessons for
other developing countries to foster economic development in this age of globalization.
Another strand of the literature has focused on the environmental and energy con-
sequences of GVC [19–21]. Two opposing hypotheses emerged with the advancement
of globalization. The first “pollution haven hypothesis” states that developing countries
increase pollution emissions when embedded in GVC. In particular, previous studies pro-
vided supportive evidence for this hypothesis [2,22]. The other “pollution halo hypothesis”
indicates that developing countries may reduce pollution emissions when embedded in
GVC because industrialized countries may diffuse their advanced technology and expe-
rience into developing countries. GVC participation has been found to reduce carbon
emissions and environmental pollution in developing countries [23,24]. Meanwhile, it
has been demonstrated that there is an inverted U-shaped relationship between GVC
participation and energy intensity [25]. To summarize, there is still no clear consensus in
the literature regarding the relationship between GVC participation and environmental
outcomes in developing countries. It appears that the existing studies have three major
shortcomings: (1) they have mostly relied on GVC participation indicators at the aggregate
country or industry level, as opposed to detailed measures of GVC participation at the
disaggregate firm level, which may result in measurement errors; (2) they have not system-
atically addressed the potential endogeneity problem, which could suffer from biases due
to reverse causality; and (3) they have not fully considered the heterogeneity across firms,
industries and regions, which might ignore the important heterogeneous effects of GVC
participation in developing countries. As the largest emerging economy, China has actively
participated in GVC through forward and backward linkages. Thus, whether Chinese
firms’ GVC participation plays a role in shaping the environmental outcomes remains to be
further studied.
Green innovation has not yet been adequately investigated as a critical bridge to
resolve conflicts between economic expansion and environmental protection. Although
the economic and environmental effects of GVC participation in developing countries
have been extensively studied in the existing literature, relatively scarce research has
systematically examined the effect of GVC participation on green innovation. To fill this
critical gap, this study aimed to explore the impact of GVC participation on firms’ green
innovation performance using a panel dataset of listed Chinese manufacturing firms, which
sheds empirical light on the role of GVC participation on green innovation in the largest
developing country.
In the era of globalization, green innovation performance typically hinges on the
import and export of intermediate goods, and the implication of GVC participation is the
share of foreign value added in total exports [4]. With the gradual deepening of the “new
development philosophy” in China, featuring innovative, coordinated, green, open and
shared growth, Chinese manufacturing firms are at the critical moment of transformation
from extensive development to intensive development. Increasing attention has been paid
Int. J. Environ. Res. Public Health 2022, 19, 8403 4 of 17

to green innovation performance of Chinese manufacturing firms, which could consider

both economic development and environmental protection. Specifically, GVC participation
can bring about advanced green production technologies and enhance the absorptive
capacity of technology spillovers, which in turn promotes green innovation. Therefore, the
objective of this study is to examine the influencing mechanism of GVC participation on
Chinese manufacturing firms’ green innovation performance.

3. Data and Methodology

3.1. Data and Sample
To investigate the relationship between manufacturing firms’ GVC participation and
green innovation performance, we merge two databases: (1) firm-level green innovation
data and (2) firm-product level trade data.
The first database is the listed firms’ database sourced from the China Stock Market
Accounting Research (CSMAR) database. It provides detailed information of each listed
firm’s financial, operating and corporate governance information, among others. This
database has been widely used in previous studies regarding Chinese listed firms’ green
innovation performance [26,27].
We also use international trade data from China’s Customs Database, which covers
Chinese exporters and importers and provides detailed information on the firm–product–
country–trade mode level transaction, including trade values, quantities, units, product
codes (i.e., 8-digit harmonized system (HS)), importing or exporting countries, contact
information, firm ownership type and trade mode. This is by far the most detailed in-
ternational trade database in China, which enables us to calculate the GVC participation
index [4,10].
The focus of this study is Chinese listed manufacturing firms, and all indicators are
constructed at the firm level. To calculate firm-level GVC participation, we match these
two databases by their contact information (i.e., firm names and contact details). After
removing observations with missing data and winsorizing extreme values at the 1% level,
we obtain an unbalanced dataset with 4577 firm–year observations from 2008 to 2014 as the
final sample.

3.2. Variables
3.2.1. Dependent Variable
The dependent variable is green innovation performance within firms (GI). Green
innovation reflects the comprehensive ecological, economic and social development of
the firm. It is beneficial for enhancing the competitiveness of the firm, thus promoting
the upgrading of industrial structures and high-quality economic growth [28]. Following
previous studies [29–31], it is calculated by the total number of green invented patent
applications, which reflects the firm’s dedication and effort in terms of green innovation for
that year.

3.2.2. Independent Variable

The independent variable of this study is GVC participation of the firm (GVC). A
wide variety of approaches to GVC participation calculation rely on World Input-Output
Database, which are based on the industry level, and they tend to ignore the heterogeneity
of firms. Following previous studies [4,32], GVC is measured by the proportion of foreign
value added in total export in this study. As shown in the Equation (1), VF and EX represent
the firms’ export foreign value added and export value, respectively. The customs dataset
is employed to calculate export trade value (EX) and import trade value (IM), whereas
domestic sales (D) are calculated by subtracting income from export value.

VF I M Ap + EXo [ I M Ao /( D + EXo )]
GVC f = = (1)
EX EX
Int. J. Environ. Res. Public Health 2022, 19, 8403 5 of 17

where the subscripts o and p denote the ordinary trade and the processing trade, respectively.
We assume that processing imports consist of foreign value added, and ordinary imports
consist of intermediate goods and final goods, where the former is used only for foreign
value added. We classify product categories into intermediate inputs, capital goods and
consumer goods, as suggested by the relevant literature [4]. Intermediate inputs of ordinary
imports are treated as an input for producing foreign value added. The numerator of the
right-hand side consists of value added created by processing trade (IMAp ), which is
measured by inputs via processing import; foreign value added created by processing trade
(EXo [ I M Ao /( D + EXo )]), which assumes that the intermediate input via ordinary trade is
used in proportion to domestic sales and exports.

3.2.3. Control Variables

Following previous studies [26,27], we control a comprehensive set of variables that
may affect the green innovation performance.
1. Income (Revenue), measured by the natural logarithm of operating revenue in the year.
2. Firm age (Age), measured by the natural logarithm of firm age.
3. Government subsidy (Subsidy), measured by the natural logarithm of government subsidy.
4. Firm size (Asset), measured by the natural logarithm of the total net asset.
5. Firm financial development potential (Tobinq), measured by the ratio of firm market
value to capital replacement cost.
6. Industry competition (HHI), measured by the Herfindahl–Hirschman index within
the industry.

3.3. Stylized Facts

The descriptive statistics of all the variables are shown in Table 1. As indicated therein,
the mean of green innovation is 1.5045, which implies that the current green innovation
of China’s listed firms needs to be improved. Moreover, all the other variables have
large variations over time, which enables us to exploit these variations and conduct the
regression analysis.

Table 1. Descriptive statistics.

Variables Definition Observation Mean S.D.

GI Green innovation 4577 1.5045 1.8194
The degree of participation in
GVC 4577 0.2108 0.3514
GVC (%)
Revenue Total operating revenue (log) 4577 21.0180 1.2235
Age Firm age (log) 4577 1.5802 0.8466
Subsidy Government subsidy (log) 4577 15.7069 2.2755
Asset Total net asset (log) 4577 21.5395 1.0118
The ratio of market value to
Tobinq 4577 2.0522 1.4834
capital replacement cost
The degree of competition in
HHI 4577 0.2696 0.1073
the industry (HHI index)

Furthermore, Figure 1 plots the mean of green invention of listed Chinese firms from
2008 to 2014. It shows that green innovation grew from 1.2011 in 2008 to 1.8488 in 2014,
which reflects that firms are paying considerable attention to green development. Dur-
ing this period, the Chinese government also promulgated a series of policy measures
to promote green growth. For example, in the 12th Five-Year Plan of 2011, it was pro-
posed to focus on energy conservation and emission reduction to promote green and
low-carbon development.
 which reflects that firms are paying considerable attention to green development. During
this period, the Chinese government also promulgated a series of policy measures to pro-
mote green growth. For example, in the 12th Five-Year Plan of 2011, it was proposed to
focus
Int. J. Environ. Res. Public Health 2022, 19, on
8403energy conservation and emission reduction to promote green and low-carbon
6 of 17
development.

Figure 1. Green innovation performance trend (2008 to 2014).

Figure 1. Green innovation performance trend (2008 to 2014).
3.4. Empirical Model Specification
3.4. Empirical Model Specification
To test the relationship between GVC participation and green innovation performance,
weToestimate
test thethe
relationship between GVC participation and green innovation perfor-
following specification:
mance, we estimate the following specification:
0
GI f t==𝛽β 0++𝛽β𝐺𝑉𝐶
𝐺𝐼 ft +
1 GVC+ 𝑿 X𝛄ft+
γ+𝐹 F+f 𝐹
𝒇𝒕
++ ++
Fi 𝐹 Ft 𝜖+ e f t (2) (2)
where
where f represents
f represents thethe firm,
firm, t denotes
t denotes thethe year,and
year, i characterizesindustry.
andi characterizes industry.The
Thedepend-
dependent
variableGI
entvariable GIdenotes
denotesthe thegreen
greeninnovation,
innovation,and andthetheindependent variableGVC
independentvariable GVCrepresents
repre-
thethe
sents degree of firm
degree of firmparticipation
participation in in
GVC.
GVC. Xft𝑿is𝒇𝒕aisset of control
a set variables
of control thatthat
variables maymay affect
affect green innovation. 𝛄 is a vector of estimated coefficients of control variables.f 𝐹i , 𝐹 Ft
green innovation. γ is a vector of estimated coefficients of control variables. F , F and
anddenote the firm,
𝐹 denote industry
the firm, and year
industry andfixed
year effects, respectively,
fixed effects, which are
respectively, included
which to control
are included
for unobservable
to control characteristics
for unobservable at firm, industry
characteristics and yearand
at firm, industry levels.
yearFinally, f t represents
levels.e Finally, 𝜖 a
random error term. For all the estimates, robust standard errors are reported.
represents a random error term. For all the estimates, robust standard errors are reported.
4. Results
4. Results
4.1. Baseline Regression Results
4.1. Baseline Regression Results
The baseline results are presented in Columns 1 and 2 of Table 2. As shown in Column
1, The baseline results
the regression are presented
coefficient in Columnsis10.2537
of GVC participation and 2 and
of Table 2. As shown
statistically in Col-
significant at the
umn 1, the regression coefficient of GVC participation is 0.2537 and statistically
5% level, which indicates that GVC participation has a positive effect on the firms’ green significant
at the 5% level,performance.
innovation which indicates that GVC
In Column participation
2, we add other has a positive
control effect
variables, andonthe
thecoefficient
firms’
green innovation performance. In Column 2, we add other control variables,
of GVC participation remains positive and significant. Among the control variables, and the co-the
efficient of GVC participation remains positive and significant. Among the control
estimated coefficients of revenue (Revenue) and size (Asset) are positive and significant, varia-
bles, the estimated
suggesting coefficients
that these factors of revenue
would (Revenue)
promote greenand size (Asset)
innovation are positive
performance. andpossible
One sig-
nificant, suggesting that these factors would promote green innovation performance.
reason is that green innovation activities usually require huge capital investment; thus, One
possible reasonhave
large firms is that green innovation
sufficient activities
financial ability usually
to carry outrequire huge capital
green research investment;
and development.
thus, large firms have sufficient financial ability to carry out green research and develop-
4.2. Robustness Checks
ment.
4.2.1. Alternative Sample
The 2008 financial crisis was an important event that affected the world economy, and
it inevitably had a damaging effect on the development of firms participating in the GVC.
Considering this circumstance, this study excluded the sample of 2008 and the adjacent
year 2009 and only retained the sample from 2010 to 2014 to re-estimate the baseline
model. According to the results shown in Column 3 of Table 2, the coefficient of GVC
remains positive and significant at the 5% level, which is qualitatively consistent with the
baseline result.
Int. J. Environ. Res. Public Health 2022, 19, 8403 7 of 17

Table 2. Baseline regression and robust checks I.

Alternative Sample
Baseline Regression
(2010–2014)
(1) (2) (3)
0.2537 ** 0.2483 ** 0.2565 **
GVC
(0.0988) (0.0985) (0.1170)
0.1982 ** 0.1583
Revenue
(0.0886) (0.1056)
−0.1970 *** −0.1622 *
Age
(0.0725) (0.0856)
−0.0007 0.0139
Subsidy
(0.0112) (0.0155)
0.2718 ** 0.2359 *
Asset
(0.1080) (0.1360)
0.0115 0.0058
Tobinq
(0.0235) (0.0263)
−0.0820 −0.8258
HHI
(0.9457) (1.4204)
1.4510 *** −8.2474 *** −6.6658 ***
Constant
(0.0265) (1.7748) (2.2254)
Firm FE Yes Yes Yes
Industry FE Yes Yes Yes
Year FE Yes Yes Yes
Observations 4577 4577 3793
Note: Robust standard errors in parentheses. * p < 0.10, ** p < 0.05, *** p < 0.01.

4.2.2. Endogeneity
The endogeneity concern occurs when GVC activities may be influenced by green
innovation, or both of these could be jointly affected by other factors. To solve this prob-
lem, we refer to the literature [33] and utilize the cube of the difference between a firm’s
GVC participation and its mean value within the same industry or the same province
as instrumental variables. Moreover, these two instrumental variables are used to test
the robustness of the baseline regression using the 2SLS method. As reported in Table 3,
Columns 1 and 2 show the results of the cube of the difference between a firm’s GVC
participation and its mean value within the same industry as the instrumental variable
(IV1), and Columns 3 and 4 represent the cube of the same difference value within the same
province as the other instrumental variable (IV2). The F-value of the instrument variable
in the first stage is greater than 10, which reflects that the instruments are not weak. Both
instrumental variables are highly correlated with GVC, which indicates the relativeness of
the instrumental variables. After accounting for the endogeneity, the coefficients of GVC
are still significantly positive at 5%, demonstrating the robustness of the baseline findings.

Table 3. Robustness checks II: 2SLS estimation.

(1) (2) (3) (4)

First-Stage Second-Stage First-Stage Second-Stage
Dependent
GVC GI GVC GI
Variable
IV1 1.5587 ***
(0.0193)
Int. J. Environ. Res. Public Health 2022, 19, 8403 8 of 17

Table 3. Cont.

(1) (2) (3) (4)

First-Stage Second-Stage First-Stage Second-Stage
Dependent
GVC GI GVC GI
Variable
IV2 1.7864 ***
(0.0198)
GVC 0.6018 ** 0.6419 **
(0.2388) (0.2547)
Revenue 0.0112 0.2005 ** 0.0049 0.1984 **
(0.0089) (0.0886) (0.0083) (0.0886)
Age 0.0026 −0.1944 *** 0.0001 −0.1957 ***
(0.0073) (0.0725) (0.0068) (0.0725)
Subsidy 0.0006 −0.0007 −0.0003 −0.0010
(0.0011) (0.0112) (0.0010) (0.0112)
Asset −0.0059 0.2721 ** −0.0099 0.2703 **
(0.0109) (0.1080) (0.0101) (0.1080)
Tobinq −0.0020 0.0122 −0.0029 0.0116
(0.0024) (0.0235) (0.0022) (0.0235)
HHI −0.0643 −0.0798 −0.1052 −0.0980
(0.0953) (0.9461) (0.0887) (0.9460)
Firm FE Yes Yes Yes Yes
Industry FE Yes Yes Yes Yes
Year FE Yes Yes Yes Yes
F-value 6525.061 8099.532
Observations 4577 4577 4577 4577
Note: Robust standard errors in parentheses. * p < 0.10, ** p < 0.05, *** p < 0.01.

5. Further Analysis: Heterogeneity Analysis

5.1. Firm Heterogeneity
The existing literature confirmed that different types of firms have different finan-
cial conditions and institutional logics [26,34], which may heterogeneously affect green
innovation. Thus, the firm heterogeneity analysis is reported in this subsection.

5.1.1. Firm Heterogeneity by Financial Constraints

Since green innovation is associated with a substantial investment, it requires the firms
to have good financial conditions. To investigate the consequences of financial condition
heterogeneity, we refer to a relevant study [26] and divide the sample into two groups: high
and low financial constraints. When calculating financial constraints, we refer to previous
literature to calculate the size–age (SA) index [35]. A higher SA index value means that the
firm is more financially constrained. Then, a firm is placed in the high financial constraints
group if the SA index is larger than the median value; otherwise, it is treated as belonging to
the low financial constraints group. As shown in Table 4, the regression coefficient of GVC
participation in the high financial constraints group is positive and statistically significant.
It indicates that GVC participation has a positive effect on green innovation only for firms
with high financial constraints.
Int. J. Environ. Res. Public Health 2022, 19, 8403 9 of 17

Table 4. Firm heterogeneity analysis: Financial constraints.

Financial Constraints
(1) (2)
High Financing Low Financing
Constraints Constraints
0.3703 ** 0.0986
GVC
(0.1685) (0.1014)
0.2199 0.2003 **
Revenue
(0.1466) (0.0956)
−0.1405 −0.0989
Age
(0.1282) (0.0762)
−0.0112 0.0089
Subsidy
(0.0205) (0.0108)
0.2173 −0.0283
Asset
(0.1756) (0.1291)
0.0757 * −0.0354
Tobinq
(0.0419) (0.0241)
−0.6417 1.1867
HHI
(1.4559) (1.1296)
−7.4691 ** −2.4785
Constant
(2.9439) (2.1788)
Firm FE Yes Yes
Industry FE Yes Yes
Year FE Yes Yes
Observations 2234 2343
Note: Robust standard errors in parentheses. * p < 0.10, ** p < 0.05, *** p < 0.01.

5.1.2. Firm Heterogeneity by Ownership

As the major economic players, state-owned enterprises play an important role in the
economic development of emerging markets [34]. In particular, there are differences in
government regulation between state-owned and non-state-owned enterprises. Therefore,
this study classifies the sample into state-owned enterprises and non-state-owned enter-
prises according to their ownership forms. As reported in Table 5, the coefficients of GVC
in the two groups are both positive and statistically significant, although the coefficient in
stated-owned firms is higher. It indicates that compared with non-state-owned enterprises,
state-owned enterprises participating in GVC may promote green innovation more strongly.

5.2. Industry Heterogeneity

Firms in different industries may experience different energy utilization efficien-
cies, production environments, etc.; thus, it is necessary to investigate the heterogeneity
across industries.

5.2.1. Industry Heterogeneity by Factor Intensity

Firstly, we classify the sample according to their factor intensity, i.e., the labor-intensive
industry, capital-intensive industry and technology-intensive industry [36]. The classifi-
cation of the industries is presented in the Appendix A, Table A1. As shown in Table 6,
the coefficient of GVC participation in the labor-intensive industry sample is 0.4344 and
statistically significant at the 5% level. Meanwhile, the coefficients of capital-intensive
and technology-intensive industries are insignificant. These results show that only GVC
participation by firms in the labor-intensive industry can promote green innovation.
Int. J. Environ. Res. Public Health 2022, 19, 8403 10 of 17

Table 5. Firm heterogeneity analysis: Ownership.

Ownership
(1) (2)
State-Owned Non-State-Owned
0.3159 * 0.1881 *
GVC
(0.1885) (0.1139)
0.3993 ** 0.1197
Revenue
(0.1633) (0.1055)
−0.1950 0.0179
Age
(0.2017) (0.0859)
−0.0177 0.0144
Subsidy
(0.0193) (0.0138)
0.3046 0.2631 **
Asset
(0.1909) (0.1312)
0.0259 0.0042
Tobinq
(0.0516) (0.0257)
−0.8491 −0.3103
HHI
(2.3330) (0.9923)
−12.8771 *** −6.8631 ***
Constant
(3.4091) (2.0887)
Firm FE Yes Yes
Industry FE Yes Yes
Year FE Yes Yes
Observations 1445 3132
Note: Robust standard errors are in parentheses. * p < 0.10, ** p < 0.05, *** p < 0.01.

5.2.2. Industry Heterogeneity by Pollution Intensity

Relying on first-mover advantages, the developed countries at the high end of GVC
transfer the processing and assembly sectors to developing countries, and developing
countries are forced to take over these industries with high pollution and high energy
consumption [37]. Thus, it is necessary to explore the heterogeneous effects across industries
with different pollution intensities. Following previous research [38], we divide the sample
into pollution-intensive industries and non-pollution-intensive industries. The pollution-
intensive industries consist of eight “severe pollution” industries, such as textile, paper
and paper products manufacturing. The classification of the industries is presented in the
Appendix A, Table A1. Table 7 shows the estimation results, and the coefficients are 0.3477
and 0.2119 for pollution-intensive and non-pollution-intensive industries, respectively.
Both coefficients are significantly positive, and the coefficient of GVC in the pollution-
intensive industry is positive at the 5% level and larger than that in non-pollution-intensive
industries. It reflects that companies in the pollution-intensive industry participating in
GVC have a greater positive impact on green innovation.

5.3. Regional Heterogeneity

The geographical imbalance is a significant characteristic of China’s economic devel-
opment [39], where the eastern region is more economically developed. Benefiting from
superior geographical location, the eastern region reformed and opened earlier, resulting
in the establishment of a large number of firms. Therefore, we divide listed firms into
eastern, central, western and northeastern regions according to their geographic locations.
According to the results in Table 8, only the coefficient of GVC participation in the eastern
region is positive and significant. It shows that the effect of GVC participation on green
innovation performance is unbalanced.
Int. J. Environ. Res. Public Health 2022, 19, 8403 11 of 17

Table 6. Industry heterogeneity analysis: Factor intensity.

Factor Intensity
(1) (2) (3)
Labor Intensive Capital Intensive Technology Intensive
0.4344 ** 0.1832 0.2535
GVC
(0.1823) (0.1331) (0.1603)
−0.1155 0.1725 0.2409 *
Revenue
(0.2586) (0.1304) (0.1316)
−0.1628 −0.2571 *** −0.1961 *
Age
(0.1560) (0.0979) (0.1172)
−0.0119 0.0017 0.0037
Subsidy
(0.0160) (0.0127) (0.0226)
0.2600 0.1622 0.2497
Asset
(0.2810) (0.1528) (0.1685)
0.0041 −0.0549 0.0311
Tobinq
(0.0538) (0.0365) (0.0347)
0.8204 1.3642 −4.2010 **
HHI
(0.8787) (1.4384) (2.0721)
−1.9801 −5.7771 ** −7.4597 ***
Constant
(4.8908) (2.6480) (2.7472)
Firm FE Yes Yes Yes
Industry FE Yes Yes Yes
Year FE Yes Yes Yes
Observations 339 1839 2399
Note: Robust standard errors are in parentheses. * p < 0.10, ** p < 0.05, *** p < 0.01.

Table 7. Industry heterogeneity analysis: Pollution intensity.

Pollution Intensity
(1) (2)
Pollution-Intensive Non-Pollution-Intensive
0.3477 ** 0.2119 *
GVC
(0.1422) (0.1274)
0.2008 0.2098 **
Revenue
(0.1670) (0.1065)
−0.3670 *** −0.1740 *
Age
(0.1219) (0.0906)
−0.0031 −0.0002
Subsidy
(0.0138) (0.0159)
0.1117 0.3157 **
Asset
(0.1764) (0.1358)
−0.0500 0.0189
Tobinq
(0.0466) (0.0278)
3.4928 * −0.4559
HHI
(2.0979) (1.1081)
−5.5977 * −9.2773 ***
Constant
(3.2024) (2.1774)
Int. J. Environ. Res. Public Health 2022, 19, 8403 12 of 17

Table 7. Cont.

Pollution Intensity
(1) (2)
Pollution-Intensive Non-Pollution-Intensive
Firm FE Yes Yes
Industry FE Yes Yes
Year FE Yes Yes
Observations 1255 3322
Note: Robust standard errors are in parentheses. * p < 0.10, ** p < 0.05, *** p < 0.01.

Table 8. Regional heterogeneity analysis.

Region Heterogeneity
(1) (2) (3) (4)
Eastern Middle West Northeast
0.3501 *** 0.0561 0.1140 0.0336
GVC
(0.1247) (0.2327) (0.3386) (0.1898)
0.1400 0.2440 0.2074 0.3596 *
Revenue
(0.1158) (0.2309) (0.2361) (0.2111)
−0.2171 ** −0.2985 * 0.0385 −0.1007
Age
(0.0883) (0.1788) (0.2929) (0.1933)
0.0051 0.0133 −0.0195 −0.0139
Subsidy
(0.0142) (0.0286) (0.0415) (0.0182)
0.2988 ** 0.3862 0.1121 0.2981
Asset
(0.1365) (0.2663) (0.3522) (0.2717)
0.0033 0.0310 0.0097 0.1150 *
Tobinq
(0.0279) (0.0569) (0.1071) (0.0636)
0.3719 −1.7673 1.0734 −6.2563 **
HHI
(1.1460) (2.0652) (3.8960) (3.1153)
−7.7794 *** −11.3319 ** −5.3627 −10.8629 ***
Constant
(2.1519) (4.6862) (7.5537) (3.5076)
Firm FE Yes Yes Yes Yes
Industry FE Yes Yes Yes Yes
Year FE Yes Yes Yes Yes
Observations 3253 676 470 178
Note: Robust standard errors are in parentheses. * p < 0.10, ** p < 0.05, *** p < 0.01.

6. Discussion
6.1. Empirical Results Discussion
This study takes Chinese listed manufacturing firms from 2008 to 2014 as final sample
to analyze the effect of participating in GVC on green innovation. The baseline result
and robust test support the hypothesis and reveal that intense participation in GVC is
conducive to green innovation. International trade, FDI and outward FDI are the key means
of GVC participation for Chinese firms [40]. When firms participate in GVC, they would
not only import advanced intermediate products but also learn advanced management
experience from multinational enterprises [18,41]. In addition, it facilitates the transmis-
sion of sophisticated technology and management experience across regions and nations,
thereby promoting green innovation. Moreover, other studies have found that developing
countries, such as China, could improve their innovation competitiveness related to high
value added from the process of production fragmentation [42].
In addition, considering China’s economic development characteristic, we conduct
heterogeneity analysis at the firm, industry and region levels.
Int. J. Environ. Res. Public Health 2022, 19, 8403 13 of 17

In the firm heterogeneity analysis, the analysis based on classification by financial

constraints provides an interesting finding: participation in GVC by firms with high
financial constraints has a positive effect on green innovation. A possible explanation could
be that firms with high financial constraints are inclined to participate in GVC and build
up cooperative relationships with international trading partners [43]. GVC participation
could help firms broaden capital sources, which could mitigate the negative effects of
financial constraints on green innovation. In addition, the group regressions by ownership
demonstrate that compared with non-state-owned enterprises, the promotion effect of
participating in GVC on green innovation is more pronounced in state-owned enterprises.
This could be due to the fact that state-owned enterprises are part of China’s political system
and have closer ties to the government [44]. On the one hand, state-owned enterprises may
face strict state governance [34]; thus, their managers have a stronger green awareness.
Previous study also confirmed that institutional pressure is an important driving factor for
green innovation [45]. On the other hand, many environment-related projects promoted by
the state government usually require green technologies, and if enterprises have obtained
green patents, it would be conducive to cooperate with the government [44].
In the industry heterogeneity analysis, the regression results by factor intensity re-
veal that only the coefficient of GVC participation in labor-intensive industry is positive
and significant. Labor-intensive industries include processing of food from agricultural
products, manufacture of textiles, etc., and China has accumulated ample production
and management experience in these industries. Compared with other industries, labor-
intensive industries have relatively lower technical barriers. Therefore, firms are more
likely to promote green innovation through learning effects and technology spillovers in
the GVC network. In contrast, firms engaging in capital-intensive and technology-intensive
activities may face low-end locking by industrialized countries, such that they are limited
in absorbing and upgrading technology [46,47], which may impede green innovation.
The heterogeneous analysis across industries with different pollution intensities shows
that the positive effect of GVC participation on green innovation is more pronounced in
the pollution-intensive industry. This could be explained by the fact that firms in these
pollution-intensive industries have stronger motivation to promote green growth to break
through resource limitation and environmental constraints [38].
In the region heterogeneity analysis, the coefficient of GVC participation in the eastern
region is positive and significant. A possible explanation could be that large numbers
of firms are concentrated in the eastern region, and the communication among firms is
more frequent [48], which promotes the spillover effect through information sharing and is
ultimately conducive for green innovation.

6.2. Implications
Green innovation has attracted the attention of scholars and practitioners, in that
it is one of the most important means for firms to manage the environmental concerns
and achieve sustainability. The manufacturing sector plays a significant role in economic
development and environmental protection. Manufacturing firms in developing countries
are also the main participants in GVC activities. Thus, it is critical to understand the effect
of GVC participation on green innovation performance.
These findings have important theoretical and policy implications for researchers,
practitioners and policymakers. First, this study systematically investigates the impact of
GVC participation on green innovation in China. Our paper provides supportive evidence
for the research hypothesis that GVC participation has a positive effect on Chinese manu-
facturing firms’ green innovation performance, which is in accordance with the theoretical
framework developed in the recent literature [40–42]. This study not only expands research
on resolving conflicts between economic expansion and environmental protection but also
provides theoretical support for Chinese manufacturing firms to participate actively in
GVC. It contributes to a better understanding of utilizing GVC participation to improve
green innovation in developing countries. Second, this study demonstrates that, in practice,
Int. J. Environ. Res. Public Health 2022, 19, 8403 14 of 17

critical knowledge, important skills and advanced technologies related to the process of
green innovation flow across countries through GVC participation. Hence, economic global-
ization plays a significant role in facilitating the diffusion of green technology and elevating
the performance of green innovation. It sheds light on how integrating into the process of
economic globalization promotes environmental performance and sustainable growth for
developing countries. Third, this study reveals the external and internal barriers to green
innovation by scrutinizing the level of GVC participation and firm characteristics. It enables
the managers of manufacturing firms to better understand and cope with the potential
barriers to the green innovation they want to practice, which will enhance the firm’s capa-
bility of sustainable development in the era of globalization. Finally, this study explores
the heterogeneous effects stemming from GVC participation across firms, industries and
regions. Policymakers in developing countries could utilize targeted policies to incentivize
firms, industries and regions to acquire advanced knowledge and technologies, thereby
creating a favorable environment in which to transfer green technology and improve green
innovation performance.

6.3. Limitations and Future Research Directions

Although this study makes several contributions to the literature, there are still some
limitations to be addressed in future research. First, our sample is based on China, one
of the largest developing countries in the world, but it would be conducive to investigate
whether our findings are generalizable to manufacturers from other developing countries in
Asia, while accounting for heterogeneity and complexity across countries. Future research
can study the positive externalities and mechanisms of GVC activities on green innova-
tion in more developing countries. It contributes to realizing economic transformation
in developing countries and provides more empirical experience for relevant theories in
development economics and environmental economics. Second, due to data limitation,
our research sample is restricted to Chinese listed firms. However, small and medium
enterprises are also active participants in economic development and globalization. It can
also be a fruitful direction for future research to determine the differences between listed
firms and those small and medium enterprises in terms of GVC participation and green
innovation performance with more in-depth survey data. Third, this study is based on
firm-level data, and we are unable to observe how firms organize internal resources to
drive green innovation. In future research, we can employ qualitative methodology to
conduct field research in specific companies. Combined with corporate management theory
and organization theory, it is valuable to provide qualitative insights into the relationship
between GVC participation and green innovation. Finally, as the digital economy has
developed rapidly around the world, the organization of GVC and its mechanisms on man-
ufacturing firms may have changed. It would be interesting to investigate the relationship
between GVC participation and green innovation in the context of the digital era with more
recent data.

7. Conclusions
This study investigates the effect of GVC participation on green innovation perfor-
mance. Using a panel dataset of Chinese listed manufacturing firms from 2008 to 2014,
we conduct panel data analyses, 2SLS estimation and heterogeneity analyses and test the
mechanisms. The results show that GVC participation increases green innovation, with
the positive effect being more pronounced for firms with greater financial constraints,
state ownership, in labor-intensive industries, in pollution-intensive industries and in the
eastern regions of China. These findings are attributed to the specific characteristics of
the Chinese context. In sum, this study demonstrates that actively participating in GVC
is the key to promoting sustainable growth when facing the need for transformation in
developing countries.
Int. J. Environ. Res. Public Health 2022, 19, 8403 15 of 17

Author Contributions: Conceptualization, S.M. and H.Y.; methodology, H.Y. and J.Y.; software, H.Y.;
validation, S.M. and J.Y.; formal analysis, H.Y.; investigation, S.M. and J.Y.; resources, S.M.; data
curation, H.Y.; writing—original draft preparation, H.Y. and J.Y.; writing—review and editing, S.M.;
visualization, H.Y. and J.Y.; supervision, S.M.; project administration, S.M.; funding acquisition, S.M.
and J.Y. All authors have read and agreed to the published version of the manuscript. Authors are in
alphabetical order and have contributed equally to the paper.
Funding: This research was funded by Fundamental Research Funds for the Central Universities;
and the Humanities and Social Science Fund of Ministry of Education of China [20YJC790099].
Institutional Review Board Statement: Not applicable.
Informed Consent Statement: Not applicable.
Data Availability Statement: Data available in the chargeable databases China Security Market and
Accounting Research (CSMAR) database and China Customs Database.
Conflicts of Interest: The authors declare no conflict of interest.

Abbreviations

GVC Global value chain

GI Green innovation
2SLS Two-stage least squares
IV Instrumental variable
R&D Research and development
FDI Foreign direct investment
CSMAR China Stock Market Accounting Research
HS Harmonized system
HHI Herfindahl–Hirschman Index
SA Size–Age

Appendix A

Table A1. Industry classification.

Pollution-
Code Industry Name Factor Intensity
Intense Industry
C13 Processing of food from agricultural products Labor Yes
C14 Manufacture of foods Capital No
C15 Manufacture of wine, drinks and refined tea Capital No
C17 Manufacture of textiles Labor Yes
C18 Manufacture of textile wears and apparel Labor No
C19 Manufacture of leather, fur, feather and related products and footwear Labor No
Processing of timber, manufacture of wood, bamboo, rattan, palm and
C20 Labor No
straw products
C21 Manufacture of furniture Labor No
C22 Manufacture of paper and paper products Capital Yes
C23 Printing, reproduction of recorded media Capital No
Manufacture of artwork and articles for culture, education, sports
C24 Capital No
and recreation
C25 Processing of petroleum, coking, processing of nuclear fuel Capital Yes
C26 Manufacture of raw chemical material and chemical products Capital Yes
C27 Manufacture of medicines Technology No
C28 Manufacture of chemical fibers Technology No
C29 Manufacture of rubber and plastic Capital No
C30 Manufacture of non-metallic mineral products Capital Yes
Int. J. Environ. Res. Public Health 2022, 19, 8403 16 of 17

Table A1. Cont.

Pollution-
Code Industry Name Factor Intensity
Intense Industry
C31 Smelting and pressing of ferrous metals Capital Yes
C32 Smelting and pressing of non-ferrous metals Capital Yes
C33 Manufacture of metals products Capital No
C34 Manufacture of general-purpose machinery Capital No
C35 Manufacture of special-purpose machinery Technology No
C36 Manufacture of automobiles Technology No
C37 Manufacture of railway, ship, aerospace and other transport equipment Technology No
C38 Manufacture of electrical machinery and equipment Technology No
Manufacture of computer, communications and other
C39 Technology No
electronic equipment
C40 Manufacture of measuring instruments Technology No
C41 Other manufactures Technology No
C42 Utilization of waste resources Capital No
C43 Repairs services of metal products, machinery and equipment Capital No

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