What's going on? Urban agglomerations and firm green innovation: Evidence from Chengdu-Chongqing Economic Circle, China

Urban agglomerations are an important spatial form of integrated regional development. However, their development may cause several environmental problems. The Chinese government has established a green strategy for urban agglomeration construction to achieve clean transformation by enhancing firm green innovation. In this context, this study collects green-granted patent data of listed firms in the Chengdu-Chongqing Economic Circle from 2000 to 2021, employs the difference-in-differences method to analyze whether firm green innovation is influenced by urban agglomerations, and explores the mediating effects of green finance as well as some moderating effects. The results show that urban agglomerations significantly improve firm green innovation. Second, urban agglomerations can partially enhance firm green innovation through the green finance channel, and firm digitalization positively moderates the mediating role of green finance. Third, the moderating analysis shows that large firms are more affected by urban agglomerations than small ones; the manufacturing industry has a greater influence than other industries; state-owned firms are not as impacted as non-state-owned firms; the level of economic and educational development can significantly enhance the positive impact of urban agglomerations on firms’ green innovation. This study presents empirical evidence on the development of regional green innovation in China. •Highlight 1: The first study explores the impact of urban agglomerations on firm green innovation.•Highlight 2: This study found that green granted utility patents are more affected than invention patents.•Highlight 3: This research analyzes whether the impact is influenced by contextual factors.•Highlight 4: State-owned enterprises receive less affected than non-state-owned enterprises.•Highlight 5: Both the regional economic and educational development levels can enhance the impact.