Entrepreneurial miracles in the low-carbon transition: Causal inference from China's low carbon city pilot

Abstract

The low-carbon transition entails a systemic transition involving resource allocation, investment strategies, and technological advancements. This green transformation may, on one hand, phase out high-emission enterprises, disrupting the original industrial structure, while on the other hand, it can foster cleaner production techniques, encouraging entrepreneurs to enter sustainable sectors and driving industrial upgrading. This study investigates the impact of such a transition on entrepreneurial activities, using China's Low Carbon City Pilot (LCCP) policy as a case study and analyzing city-level data on new startups from 2003 to 2019. The results indicate that LCCP significantly stimulates entrepreneurial activity in regulated cities, with entrepreneurial creation outweighing entrepreneurial loss. Notably, the effects of LCCP vary geographically: significant growth in entrepreneurial activity is observed in the southern, central, and eastern regions, while the northern and northeastern regions show no significant improvement and may even experience negative effects. Furthermore, LCCP's impact on entrepreneurial activity is more pronounced in cities with economic prosperity, concentrated human capital, high levels of openness to foreign investment, and a non-resource-based economy. The study also finds that LCCP catalyzes entrepreneurial activity by driving green financial development and green technological innovation. Finally, government interventions such as supporting green industries, strengthening regulatory measures, prioritizing innovation activities, and protecting intellectual property demonstrate a positive moderating effect. This study contributes new empirical insights into the effect of institutional factors on entrepreneurial activities, offering valuable implications for the design of environmental policies amid the global shift toward a low-carbon future.