Received: 20 August 2023 Revised: 15 October 2023 Accepted: 19 October 2023

DOI: 10.1002/bse.3615

RESEARCH ARTICLE

Can environmental non-government organizations promote

firms' environmental innovation? The role of environmental
regulation and informatization level

Zhongju Liao | Mengnan Zhang

School of Economics and Management,

Zhejiang Sci-Tech University, Hangzhou, China
Correspondence
Zhongju Liao, School of Economics and
Management, Zhejiang Sci-Tech University,
Hangzhou 310018, China.
Email: zju96437@163.com
Abstract
Environmental non-governmental organizations (ENGOs), as important civil society
organizations in the environmental arena, play a role in promoting firms' environmen-
tal behavior. Based on institutional theory, this study constructed a relationship
model among environmental ENGOs, environmental regulation, informatization level,
and environmental innovation. Using data from 31 provinces in China from 2010 to
2021 as research samples, this study investigated the impact of ENGOs on firms'
environmental innovation, as well as the mediating role of environmental regulation
and the moderating role of the informatization level. The results showed that ENGOs
had a positive effect on firms' environmental innovation, and the informatization
level negatively moderated the impact of ENGOs on firms' environmental innovation,
but environmental regulation did not play a mediating role in the relationship
between ENGOs and firms' environmental innovation. Based on the conclusions, this
study suggests leveraging the role of ENGOs, strengthening the power of environ-
mental regulation, and improving the informatization level to drive firms' environ-
mental innovation.

KEYWORDS
environmental innovations, environmental non-governmental organization, environmental
regulations, informatization level

1 | I N T RO DU CT I O N new concept and is an inevitable choice for firms to achieve green

As the consequences of human disregard for the environment, such
as the scarcity of environmental resources, have become increasingly
evident, the public has paid increasing attention to environmental
issues (Cetron & Davies, 2008). Environmental innovation is an impor-
tant means for firms to break through the constraints of environmen-
tal resources and to achieve green development (Zhang, Xing, &
Wang, 2020). Environmental innovation is a type of innovation that
creates value for firms while reducing environmental damage via inno-
vative programs related to environmental management (Fussler &
James, 1996; Kemp & Pearson, 2007). Environmental innovation is a
Abbreviation: ENGOs, environmental non-governmental organizations.
development and upgrades (Cao & Chen, 2019). Scholars have widely
acknowledged environmental innovation as a key driving force for
sustainable development (Govindan et al., 2021; Silvestre &
Ţîrc
a, 2019). Environmental innovation can promote sustainable eco-
nomic development, drive the upgrading of industrial structures, and
stimulate job creation (De Marchi, 2012). Since the 1970s, govern-
ments around the world have introduced three different types of
environmental regulation—command-and-control, market-based
incentives, and public participation—to stimulate firms' environmental
innovation. Informal environmental regulations refer to spontaneous
environmental behaviors, such as monitoring environmental pollution,
protests against environmental damage, and complaints from social
groups or individuals pursuing higher environmental quality (Peng &

Bus Strat Env. 2023;1–10. wileyonlinelibrary.com/journal/bse © 2023 ERP Environment and John Wiley & Sons Ltd. 1

2 LIAO and ZHANG
Ji, 2022). Existing research has shown that command-and-control and
market-based environmental regulations play a positive role in pro-
moting firms' environmental innovations (Yu et al., 2017), whereas
informal environmental regulations play a weaker role (Wang
et al., 2020).
Scholars have conducted extensive research on the factors
influencing firms' environmental innovation. However, the existing
studies have the following gaps: First, with regard to the research
on the impact of environmental regulation on firms' environmental
innovation, most scholars have focused on the influence of formal
environmental regulation, such as environmental policies and envi-
ronmental laws (Liao, 2018; Luo et al., 2021; Zhang, Kang,
et al., 2020), while neglecting the impact of informal environmental
regulations (Kathuria & Sterner, 2006). Informal environmental reg-
ulation is an effective supplement to formal environmental regula-
tion (Blackman, 2010), with empirical evidence of the significance
of their influence on firms' environmental innovations. However,
there are relatively few relevant studies on the impact of informal
environmental regulation on firms' environmental innovation.
Second, most of the existing research on the relationship between
informal institutions and firms' environmental innovations has
focused solely on the direct impact of informal institutions on
firms' environmental innovation (Kathuria & Sterner, 2006) or on
the mediating role of top management's environmental awareness
(Chen & Liang, 2023; Tseng et al., 2013); however, little research
has been conducted to analyze the mediating role of environmental
regulation between the two. Further research is needed to explore
the pathways via which informal institutions affect firms' environ-
mental innovation. Third, informatization methods can be used to
compel polluters to reduce pollution, thus alleviating environmental
pressure effectively, and have become an important driver for
enhancing the efficiency of technological innovations
(Nambisan, 2003). However, most scholars have focused on the
direct impact of informatization on firms' environmental innovation
(Mubarak et al., 2021), and few studies have included the informa-
tization level as a moderating variable in research models related to
firms' environmental innovation; therefore, there is room for
improvement in the related research.
Accordingly, to address the gaps in the previous research, this
study explored the role of environmental non-governmental organi-
zations (ENGOs) in firms' environmental innovation and the underly-
ing mechanisms. Relationship models for ENGOs, environmental
regulation, informatization level, and firms' environmental innovation
were constructed for this study to investigate the influence of envi-
ronmental ENGOs on firms' environmental innovation, and to test
the mediating role of environmental regulation and the moderating
role of informatization level. This study makes the following contri-
butions. First, unlike existing research that has investigated the influ-
ence of formal regulations on firms' environmental innovation
(Zhong & Peng, 2022), the impact of environmental ENGOs on firms'
environmental innovation was examined from the perspective of
informal institutions in this study, thereby enriching institutional
theory. Second, in contrast to the direct effect of existing
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environmental mechanisms on firms' environmental innovation
(Ambec & Barla, 2006; Luo et al., 2021), environmental regulation
was used as a mediating variable in this study to enrich the research
on the direct mediating mechanism of environmental regulation
regarding ENGOs and firms' environmental innovation, thereby con-
tributing to the existing research. Finally, the regional informatization
level can affect firms' environmental innovation activities (Horbach
et al., 2013). In this study, the informatization level is used as a
moderating variable to explore the moderating role of different
informatization levels in the relationship between ENGOs and firms'
environmental innovation, thereby enriching the research on the
contextual factors pertaining to ENGOs and firms' environmental
innovation.
2 | THEORETICAL BACKGROUND AND
RE SE ARCH HY POT H ES ES
2.1 | Theoretical background
A country's institutional environment consists of relatively stable
rules, social norms, and cognitive structures (Scott, 1987). According
to the view of new institutional economics, institutions can be divided
into three categories: formal institutions, informal institutions, and the
related institutions that enforce them (Kaufmann et al., 2018;
Williamson, 2009). Formal institutions represent standardized,
government-defined and coercively enforced constraints, while infor-
mal institutions represent non-coercive, unwritten, informal con-
straints (Williamson, 2009).
Formal environmental regulations are mainly issued by the gov-
ernment and environmental departments, while informal environ-
mental regulations primarily stem from the public and from ENGOs
(Zhang, Liu, et al., 2022). Formal environmental regulations are
standards that government agencies establish to improve environ-
mental quality with the aim of reducing environmental pollution
through public power (Xie et al., 2017), and are characterized by
direct command-and-control approaches by administrative bodies.
Informal environmental regulations refer to the spontaneous nego-
tiation and discussions involving the public, the media, environmen-
tal organizations and environmental polluters using various means
such as public opinion and collective resistance to exert pressure
on polluters and to encourage them to reduce environmental pollu-
tion (Pargal & Wheeler, 1996). Formal environmental regulations
are mandated by the government; informal environmental
regulations are not compulsory, and exert soft pressure instead
(Féres & Reynaud, 2012). Furthermore, informal environmental reg-
ulations can be a useful supplement to formal environmental
regulations by addressing non-compliant behaviors that are outside
of the scope of the latter (Tietenberg, 1998), and formal
environmental regulations are largely influenced by informal
environmental regulations (Féres & Reynaud, 2012). In fact, formal
and informal environmental regulations mutually reinforce each
other.

LIAO and ZHANG
2.2 | Influence of ENGOs on firms' environmental
innovation
A non-governmental organization (NGO) is an independent and formal
(professional) social entity with a certain degree of autonomy outside
of the government system (Martens, 2002); NGOs play a certain sig-
nificant role within civil society (White, 1994). An ENGO is a type of
social organization within civil society that aims to protect the envi-
ronment and is a non-profit organization that provides environmental
services to society (McCormick, 2023). Civil society organizations
have unique social characteristics and political influence in public gov-
ernance (Rogers, 2006), and ENGOs represent a distinct form of civil
society organizations with unique social functions in environmental
governance (Jepson, 2005; McCormick, 2023).
The profit-seeking nature of the market economy can lead firms
to overlook negative impacts on the environment in their pursuit of
profit, and ENGOs can serve as a third force to compensate for gov-
ernment and market failures by addressing some of the environmental
issues arising from such failures (Wu et al., 2017). First, ENGOs and
firms' stakeholders can represent the interests of the general public,
consolidate the public demand for firms' environmental responsibility,
serve as a communication bridge for public engagement with firms,
and reflect consumers' demands for environmentally friendly products
(Albino et al., 2009). To some extent, these organizations can influ-
ence corporate decision-making about methods of production,
encourage the implementation of related environmentally friendly
strategies, and proactively promote the adoption of green innovation
technologies and the production of eco-friendly products (Kathuria &
Sterner, 2006).
Second, the general public's attention to environmental issues
can exert intangible pressure on firms, thus prompting them to imple-
ment development strategies related to environmental protection,
energy conservation, and emission reductions (Kathuria & logical environmental protection, environmental governance publicity,
Sterner, 2006). Regardless of whether social organizations play an
important role or not, an increase in the number of social organiza-
tions will increase the soft binding force on firms to a certain extent,
increase the intangible external pressure, and affect firms' strategic
management behavior (Ahrweiler et al., 2019). The role of ENGOs, as
public-led social organizations, is to serve as a mechanism for volun-
tary restrictions and the social public's supervision of environmental
pollution (Pargal & Wheeler, 1996), to supervise the pollution and
consumption behavior in firms' production processes, and to posi-
tively guide firms toward green reform and expedite their green trans-
formation (Ahrweiler et al., 2019). ENGOs have the advantage of
being able to offer unique and valuable expertise in environmental
innovation, which helps firms obtain professional knowledge and envi-
ronmental information related to environmental innovation more effi-
ciently, thereby improving the efficiency of firms' environmental
innovation by providing effective ideas for firms' environmental inno-
vation and helping firms to overcome the bottlenecks in environmen-
tal innovation. In addition, ENGOs have wide-ranging social network
systems due to the high mobility of public groups (Brunner &
Marxt, 2013). ENGOs release reports on corporate pollution behavior
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3
to the public through information disclosure, an action that exerts
social pressure on firms and forces them to implement environmental
innovation (Li, He, et al., 2021). Accordingly, the following hypothesis
is proposed:
H1. ENGOs have a positive impact on firms' environ-
mental innovation.
2.3 | The mediating role of environmental
regulation
Environmental regulations are constraints that are imposed on various
behaviors that pollute the public environment, and target individuals
or organizations with the aim of protecting the environment, either in
the form of tangible systems or through unconscious mechanisms
(Zhong & Peng, 2022). Environmental regulations are aimed at pro-
tecting the environment, improving the ecological environment
through policies and regulations, and using mandatory measures to
coordinate environmental and economic benefits (Rubashkina
et al., 2015). Based on the prevention and control of environmental
pollution, environmental regulations aim to minimize the negative
impacts of economic activities on the environment through the trans-
formation of production modes (Zhong & Peng, 2022). Environmental
regulations involve various stakeholders, including the government,
environmental departments, the public and NGOs, and have a positive
effect on firms' environmental innovation (Brunnermeier &
Cohen, 2003).
ENGOs are the main driver behind vigilance and advocacy for
environmental regulation and are key players in environmental regula-
tion (Selden & Song, 1994). In addition, as a representative body in
informal environmental regulation, ENGOs play a unique role in eco-
and the implementation and supervision of environmental policies and
regulations. By promoting and supervising the implementation of
environmental monitoring policies at the local government level, they
proactively play a guiding role in environmental regulation in the
green technological innovation and green transformation of firms,
thus enhancing the positive effect of environmental regulation on
firms' environmental innovation (Ambec & Barla, 2006; Luo
et al., 2021). Moreover, ENGOs are a key factor in influencing the for-
mulation of environmental governance systems. They convey the pub-
lic's desire for environmental governance and assist government
departments to further improve relevant laws and regulations
pertaining to environmental governance, thereby effectively
promoting relevant government departments to adopt more formal
environmental regulation measures, thus enhancing the intensity of
environmental regulation (Luo et al., 2021).
According to Porter and van der Linde (1995), appropriate envi-
ronmental regulations can stimulate firms to engage in environmental
innovation; firms can enhance their operational efficiency through
environmental innovation, thereby offsetting the costs incurred due
to environmental regulations. This phenomenon is the “innovation

4 LIAO and ZHANG
compensation” effect of environmental regulations, which can coun-
terbalance the “compliance costs” for firms, thereby contributing to
the achievement of synergistic development between economic and
environmental benefits and fostering long-term improvements in
firms' production efficiency, thus enhancing their competitive advan-
tage (Wang et al., 2023). Previous studies have confirmed that envi-
ronmental regulations are considered to be crucial driving forces for
fulfilling corporate environmental responsibilities. Environmental reg-
ulations can encourage firms to proactively undertake and fulfill their
environmental responsibilities (Zhong & Peng, 2022), motivate them
to pursue environmental innovation and attain sustainable develop-
ment. In addition, governments enact a series of environmental regu-
latory measures, including policies and regulations to govern
corporate production activities, and require firms to proactively fulfill
pollution control obligations, thus forcing them to engage in green
technology innovations (Wang et al., 2020). Accordingly, the following
hypothesis is proposed:
H2. Environmental regulation plays a mediating role in
the relationship between ENGOs and firms' environ-
mental innovation.
2.4 | The moderating role of the
informatization level
Informatization is the process of using new information technology as
a means of promoting socio-economic development (Rogers, 2000).
Improvements in the informatization level lead to the continuous
development of information technology and facilitate the sharing and
integration of various value elements, thereby enhancing work effi-
ciency (Lee et al., 2015). Networks appear to play a more significant
role in environmental innovation than they do in standard innovation
(Horbach et al., 2013); in addition, information technology can incen-
tivize firms to proactively engage in environmental innovation
(Mubarak et al., 2021).
Due to the continuous development in the information age, infor-
mation technology can effectively address issues caused by informa-
tion gaps, alleviate information asymmetry between the public and
firms, and help the public monitor the pollution behaviors of firms
effectively. Improvements in the informatization level effectively
prompt the public to increase their supervision of corporate activities
that harm the ecological environment, to urge firms to pay more
attention to their pollution emissions, and to take proactive measures
such as energy conservation, emission reductions, green initiatives,
and technological upgrades (Wu & Gao, 2021). In addition, using the
powerful information exchange capabilities provided by the internet,
firms can respond to the public's needs more appropriately, promote
their own customized production, and respond effectively to the pub-
lic's rights and expectations for green consumption. At the same time,
with the help of the information platform, the public can better under-
stand the green benefits and value generated by firms and can
encourage firms to continue to implement environmental innovation.
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The behavior of the public or NGOs to urge firms or individuals to
self-restrict their pollution behavior through voluntary environmental
agreements and other non-mandatory measures is called informal reg-
ulation (Wu & Gao, 2021). When the level of informatization is
increased, firms' pollution behaviors become transparent and open, the
supervisory role of the public ensures that firms' pollution and con-
sumption behaviors will be improved, the pressure of public opinion
will increase, and firms will carry out innovative transformations due to
external pressure, which will weaken the supervisory role played by
ENGOs. In addition, via the use of information network platforms, the
public will engage in activities such as environmental education, pro-
tests against pollution, and mass reporting of firms that pollute the
environment (Pien, 2020), play the role of public opinion supervisors,
and exert pressure on firms to force them to implement environmental
innovation. Furthermore, the information network can continuously
transmit the public's demands for environmental innovation to firms
(Malhotra et al., 2005), help firms reduce innovation costs (Bi
et al., 2014), decrease the innovation cycle, and thus stimulate firms'
environmental innovation directly. In addition, informatization can help
the outside world to supervise firms' implementation of and compli-
ance with energy conservation and emission reduction policies more
efficiently and transparently, and to report the violation of relevant
laws and regulations through the e-government information portal in a
timely manner, which will be effective in urging firms to comply with
environmental laws and regulations and to curb firms' pollution behav-
iors. Accordingly, the following hypothesis is proposed:
H3. The informatization level negatively moderates the
influence of ENGOs on firms' environmental innovation.
3 | METHODS
3.1 | Data sources
The data from 31 provinces in China (excluding Hong Kong, Macao,
and Taiwan) from 2010 to 2021 were selected as the research sample
for the study, with a total of 372 valid samples being obtained. The
firms' green patent data were obtained from the China Intellectual
Property Administration, and the ENGOs' data were obtained from
social organizations registered on the National Social Organization
Credit Information Publicity Platform. We determined whether an
NGO was an ENGO based on whether the industry and business
scope of the registered social organization involved environmental
protection, and then determined the number of existing ENGOs per
year combined with the business situation. The environmental regula-
tion data were obtained from the China Statistical Yearbook on
Environment. Other data for all the provinces, including the total reve-
nue from postal and telecommunications services, the gross domestic
product (GDP), the GDP per capita, the output value of the tertiary
industry, the output value of the secondary industry, the local general
public budget, the total foreign direct investment (FDI), and the
regional GDP, were all sourced from the China Statistical Yearbook.
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LIAO and ZHANG 5

3.2 | Variable measurement TABLE 1 Descriptive statistics.

Variables N Min Max Mean SD

Environmental innovation (EI). The number of patents is widely used
1. ENGOs 372 2.303 6.919 4.683 0.895
in knowledge and innovation research and has always been an
2. ER 372 0.693 6.652 4.621 0.879
important indicator for measuring innovation capabilities
3. IDI 372 0.361 3.366 1.552 0.708
(Brunnermeier & Cohen, 2003). Patents reflect not only
4. EI 372 0.000 11.103 7.432 1.795
innovation activities, output, and performance accurately but also
5. GOV 372 2.359 4.893 3.182 0.476
identify patent types clearly (Griliches, 1998; Rodríguez-Pose
et al., 2021). Drawing on the research by Brunnermeier and Cohen 6. FDI 372 5.085 2.075 0.097 1.299

(2003) and Chen et al. (2017), the sum of the number of patent 7. R&D 372 1.659 1.876 0.278 0.665
applications for green inventions and the utility model patents of 8. ISU 372 0.694 1.667 0.099 0.417
firms were used to measure environmental innovation in this 9. PGDP 372 9.482 12.123 10.816 0.473
study.
Abbreviations: EI, environmental innovation; ENGOs, environmental non-
Environmental NGOs (ENGOs). Referencing the study by Pien governmental organizations; ER, environmental regulation; FDI, foreign
(2020), the number of ENGOs in 31 provinces was selected to mea- direct investment; GOV, degree of government intervention; IDI,
sure ENGOs. Given the lagging impact of ENGOs, we applied a lag informatization level; ISU, industrial structure; PGDP, level of economic
development; R&D, intensity of research and development.
phase treatment to ENGOs in the analysis.
Environmental regulation (ER). Following the approach described
by Wang et al. (2020), Ambec and Barla (2006), and Wu and
Gao (2021), the environmental regulations issued by each province in
TABLE 2 Regression results for direct effects.
the current year were used as an indicator of ER in this study.
Informatization level (IDI). Following the method for measuring the Environmental innovation
development of regional informatization described by Liu et al. (2020), Variables Model 1a Model 1b
Li, Liu, et al. (2021), and Li and Wang (2022), the proportion of the
ENGOs 0.263*
total postal and telecommunications revenue in the GDP was adopted
GOV 1.005*** 0.907***
to reflect the overall level of informatization development in each
FDI 0.119*** 0.077**
region in this study.
R&D 0.092 0.124
Control variables. Drawing on the research by Zhang, Ma, et al.
ISU 0.608*** 0.502***
(2022), Liu et al. (2021), and Luo et al. (2021), the level of economic
development (PGDP), the industrial structure (ISU), the degree of gov- PGDP 1.139*** 1.040***

ernment intervention (GOV), the intensity of research and develop- Constant 8.043** 7.803*

ment (R&D), and the FDI were selected as control variables for this Cross-section Fixed Fixed
study; the per capita GDP was used to represent the level of eco- Period Fixed Fixed
2
nomic development, and the ratio of the output value of the tertiary R 0.976 0.975
industry to the output value of the secondary industry in each prov- Adjusted R2 0.972 0.972
ince was used to measure the industrial structure. GOV was measured F 282.337*** 254.149***
as the proportion of the local general public budget expenditure in the
Abbreviations: ENGOs, environmental non-governmental organizations;
GDP. R&D was measured as the ratio of regional R&D expenditure to
FDI, foreign direct investment; GOV, degree of government intervention;
GDP. FDI was measured as the ratio of the total FDI, which was con- ISU, industrial structure; PGDP, level of economic development; R&D,
verted into Chinese yuan (RMB) based on exchange rates, to the intensity of research and development.
regional GDP. *Represents significance at 10%.
**Represents significance at 5%.
The above-mentioned indicators were all in the form of natural
***Represents significance at 1%.
logarithms to reduce the differences among the indicators.

4 | RESULTS levels of the firms' environmental innovations. ENGOs had a mini-

4.1 | Descriptive analysis
Table 1 provides the results of the descriptive analysis.
As seen in Table 1, EI had a minimum of 0.000 and a maxi-
mum of 11.103; hence, there were obvious differences in the
mum of 2.303 and a maximum of 6.919, and ERs had a minimum
of 0.693 and a maximum of 6.652, which indicated apparent differ-
ences in the number of NGOs and ERs. IDI had a minimum of
0.361 and a maximum of 3.366, and the SD was 0.708; hence,
there were small differences in the levels of IDIs among the vari-
ous provinces.
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6 LIAO and ZHANG

4.2 | Regression analysis
1. Baseline analysis of the relationship between ENGOs and firms'
environmental innovation
Regression analyses were performed using the Eviews11 soft-
ware. Table 2 presents the regression results for the direct effects of
ENGOs on firms' environmental innovation.
As seen in Table 2, Model 1a indicated that four control variables
had a significant effect on firms' environmental innovation. After five
variables were controlled, Model 1b showed that the coefficient for
the influence of ENGOs on firms' environmental innovation was
0.263, which was significant at the 10% level, thus indicating that
ENGOs had a significant and positive promotional effect on firms'
environmental innovation. The R2 was 0.975, which indicated that the
model had a high goodness of fit. Therefore, Hypothesis 1 was
supported.
2. The mediation effect test
Table 3 presents the regression results for the mediating role of
environmental regulation regarding environmental ENGOs and firms'
environmental innovation.
As seen in Table 3, the coefficient for the influence of ENGOs on
environmental regulation was 0.313; it was significant at the 10%
level, thus indicating that ENGOs had a significant and positive pro-
motional effect on environmental regulation. In Model 2c, the coeffi-
cient for the influence of ENGOs on firms' environmental innovation
was 0.267 and was significant at the 10% level, which indicated that,
after the introduction of environmental regulation, the significant rela-
tionship between environmental ENGOs and firms' environmental
innovation remained unchanged; however, the environmental regula-
tion (β = .012, p > .1) had no significant effect on the firms' environ-
mental innovation. Moreover, a Sobel test was conducted in this
study, and the results revealed that the indirect effect was not signifi-
cant (z = .143, p > .1). In summary, environmental regulation did not
play a mediating role between ENGOs and the firms' environmental
innovation; hence, Hypothesis 2 was not supported.
3. The moderating effect tests
Table 4 presents the test results for the moderating effect of the
informatization level on the relationship between ENGOs and
the firms' environmental innovation.
The results in Table 4 show that the coefficient for the influence
of ENGOs * informatization level on environmental innovation was
0.042, and was significant at the 5% level. In addition, the R2 of
Model 3b was 0.976, thus indicating that the model had a high good-
ness of fit. In summary, the informatization level played a negatively
moderating role between ENGOs and the firms' environmental inno-
vation; hence, Hypothesis 3 was supported.
4.3 | Robustness test
To test the robustness of the above findings, a robustness test was
conducted by substituting the methods for measuring the dependent
variable as follows: First, the number of patent applications for green

T A B L E 3 Regression results for the

Environmental regulation Environmental innovation
mediating role of environmental
Variables Model 2a Model 2b Model 2c regulation.
ENGOs 0.313* 0.267*
ER 0.012
GOV 0.685* 0.737* 0.898***
FDI 0.032 0.019 0.076**
R&D 0.028 0.084 0.123
ISU 0.055 0.069 0.503***
PGDP 1.431*** 1.420*** 1.023***
Constant 22.291*** 21.001*** 7.554*
Cross-section Fixed Fixed Fixed
Period Fixed Fixed Fixed
2
R 0.815 0.8222 0.975
Adjusted R2 0.788 0.794 0.972
F 31.027*** 29.563*** 247.965***

Abbreviations: ENGOs, environmental non-governmental organizations; ER, environmental regulation;

FDI, foreign direct investment; GOV, degree of government intervention; ISU, industrial structure; PGDP,
level of economic development; R&D, intensity of research and development.
*Represents significance at 10%.
**Represents significance at 5%.
***Represents significance at 1%.
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LIAO and ZHANG 7

T A B L E 4 Regression results for the moderating effect of the Zhang, Xu, and Feng (2022) and by Kathuria and Sterner (2006).
informatization level. ENGOs played a vital role in environmental supervision (Pargal &
Environmental innovation Wheeler, 1996), and exerted a positive impact on the firms' environ-
mental innovation and green transformations (Ahrweiler et al., 2019),
Variables Model 3a Model 3b
which is in line with the social role of ENGOs.
ENGOs 0.259* 0.281**
Second, ENGOs had a significant effect on environmental regula-
IDI 0.033 0.050
tion, while environmental regulation had no significant effect on the
IDI * ENGOs 0.042** firms' environmental innovation. The findings of this study are consis-
GOV 0.898*** 0.956*** tent with the conclusions drawn by Wang et al. (2020). ENGOs can
FDI 0.076** 0.073** influence environmental regulation, mass supervision and information
R&D 0.114 0.128 disclosure by ENGOs increase the intensity of environmental regula-
ISU 0.511*** 0.483*** tion (Ambec & Barla, 2006; Luo et al., 2021). Although ENGOs
PGDP 1.053*** 1.113*** affected environmental regulation and drove firms' environmental

Constant 7.951** 8.754**
Cross-section Fixed Fixed
Period Fixed Fixed
R2 0.975 0.976
Adjusted R2 0.972 0.972
F 247.959*** 245.350***
Abbreviations: ENGOs, environmental non-governmental organizations;
FDI, foreign direct investment; GOV, degree of government intervention;
IDI, informatization level; ISU, industrial structure; PGDP, level of
economic development; R&D, intensity of research and development.
*Represents significance at 10%.
**Represents significance at 5%.
***Represents significance at 1%.
inventions at the provincial level was used to replace the sum of the
number of patent applications for green inventions, and the patent
applications for the firms' utility models were used to measure envi-
ronmental innovation. Second, the amount of collected fees for pollu-
tion discharge was used to replace the quantity of environmental
policies to measure environmental regulations. The robustness test
results showed that environmental regulation was not a mediating
variable and that the information level was a moderating variable, thus
proving the robustness of the research results and the reliability of
the conclusions of this study.
5 | C O N CL U S I O N A ND D I S C U S S I O N
5.1 | Conclusion
By taking the data from 31 provinces in China from 2010 to 2021 as
the research sample, this study established a model to investigate the
impact of ENGOs on firms' environmental innovation, the mediating
role of environmental regulation, and the moderating role of the infor-
matization level. The main conclusions are as follows.
First, ENGOs had a significant and positive impact on the firms'
environmental innovation. This study provided quantitative analyses
that confirmed the crucial role of ENGOs as informal environmental
regulators and their ability to promote firms' environmental innova-
tion, which is consistent with the research conclusions drawn by
innovation proactively (Wang et al., 2020; Zhong & Peng, 2022), envi-
ronmental regulation did not play a mediating role. Previous studies
have also indicated that environmental regulation may suppress or
have no significant effect on firms' environmental innovation (Feng
et al., 2019; Yuan & Zhang, 2017).
Third, the informatization level negatively moderated the impact
of ENGOs on firms' environmental innovation. This study confirmed
that the informatization level played a negatively moderating role
between ENGOs and firms' environmental innovation and that the
improvement of informatization level may affect the role of ENGOs in
firms' environmental innovation to a certain extent (Wu & Gao, 2021).
Informatization provides a convenient and effective means for the
public to supervise the pollution behaviors of corporate production
and operations. It improves public participation by allowing the public
to understand the pollution behavior of corporate production and
operation promptly (Zhang, Liu, et al., 2022). However, when the pub-
lic's role in supervising firms' pollution behavior is strengthened, the
supervisory role of ENGOs will be weakened, and the positive role of
ENGOs in firms' environmental innovation will also be weakened.
5.2 | Managerial implications
The results of this study have certain implications, both for firms and
for government departments.
First, cross-industry collaboration among firms can facilitate their
green development. Firms can enhance their own efficiency, stimulate
technological innovation, and achieve incremental progress through
collaboration with NGOs (Shwom & Bruce, 2018). Firms should
strengthen their cooperation and exchanges with ENGOs, fully
leveraging ENGOs' unique role in environmental arenas and their
strong reputation, status, and broad influence within society to
enhance the social impact and green effect of firms (Brunner &
Marxt, 2013). Furthermore, it is necessary to harness the power of
public involvement in supervising corporate pollution behavior in
order to expedite environmental innovation and promote firms' green
development (Pargal & Wheeler, 1996).
Second, it is necessary to improve supervision and management
systems and to adjust environmental regulation. In recent years, due
to the increase in the informatization level, the role of ENGOs in

8 LIAO and ZHANG
addressing environmental issues has gradually become more promi-
nent, particularly in the supervision of corporate pollution behavior.
However, as Goldar and Banerjee (2004) pointed out, the “formal”
expression of informal regulations is intended to urge relevant gov-
ernment departments to increase regulatory efforts or the intensity of
environmental regulation. In this regard, government departments
should establish and improve the mechanisms for the establishment
and development of ENGOs, value the social functions of ENGOs, for-
mulate appropriate policies to support and standardize ENGOs' partic-
ipation in environmental supervision, and strengthen the informal
regulatory power of ENGOs. At the same time, environmental regula-
tion should play a guiding role in firms' green technology innovations
and green transformation, and play a more positive role in firms' envi-
ronmental innovation (Ambec & Barla, 2006; Luo et al., 2021).
Third, the informatization level and the efficiency of environmen-
tal innovation should be enhanced. The amount of information has
multiplied due to the continuous development and wide application of
information technology, and the informatization level has become an
important factor for firms to enhance their market competitiveness.
Regional informatization has a certain degree of influence on firms'
environmental innovation activities (Horbach et al., 2013). The
enhancement of the informatization level promotes not only the effi-
ciency of information dissemination (Bennett, 2003) but also saves
time for firms in the search for information and in exchanging infor-
mation with stakeholders, thereby saving some of the costs that are
entailed in environmental innovation (Bi et al., 2014). Furthermore,
informatization helps firms to understand the green demands of the
market in a timely manner, to implement targeted environmental inno-
vation, to enhance the efficiency of firms' environmental innovation,
and to seize opportunities in the green market (Malhotra et al., 2005).
5.3 | Limitations and directions for future study
Although this study involved an empirical analysis of the relationship
among ENGOs, environmental regulation, and firms' environmental
innovation and the results yielded, there are still some limitations.
First, due to various constraints, the sum of the number of patent
applications for green inventions and the number of patents for utility
models was used to measure the firms' environmental innovation.
Second, the sample size was limited, and there was no classification
analysis of the firms according to different industries, which resulted
in a lack of comparison of the firms' environmental innovation across
industries. Third, the Chinese ENGOs investigated in this study were
established relatively late; therefore, the ENGOs still had imperfect
systems and inadequate management, potentially leading to bias in
the statistics. To address these limitations, future studies should
expand the sample size to enhance the accuracy of the data. In addi-
tion, more variables should be included in the models to increase the
credibility of the research results.
ORCID
Zhongju Liao https://orcid.org/0000-0003-1973-9860
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How to cite this article: Liao, Z., & Zhang, M. (2023). Can
environmental non-government organizations promote firms'
environmental innovation? The role of environmental
regulation and informatization level. Business Strategy and the
Environment, 1–10. https://doi.org/10.1002/bse.3615