The effect of venture capital on green innovation: Is environmental regulation an institutional guarantee?

Venture capital (VC) may play a role in urban green innovation (GI) by providing long-term financial support. Based on panel data from 150 cities in China, this study analyzes the impact of VC on urban GI and the underlying mechanism. The research conclusions are as follows. VC significantly promotes urban GI, and we find micro-level evidence for this conclusion. The results of a quantile regression show that with an improvement in a city's GI level, the positive effect of VC shows an increasing trend. A mechanism analysis shows that VC promotes urban GI by enhancing urban investment and innovative talent agglomeration and that the accumulation of high-quality human capital brought by VC is the main reason for its positive impact on urban GI. In addition, the influence of VC on urban GI exhibits a threshold effect based on environmental regulations. There is an optimal range of environmental regulation intensity that maximizes the effect of VC on GI. This study confirms the important role of VC in regional GI activities, enriching the research on the innovation effect of VC and providing a theoretical and practical reference for promoting green economic development.