Water Policy (Sep 2022)
The unintended effects of inter-basin water transfer policies on corporate research and development activities
Abstract
Inter-basin water transfer (IBWT) policies alter the spatial distribution of water endowments and trigger changes in environmental regulation policies, which may unintentionally impact the research and development (R&D) activities in IBWT water-receiving areas. However, the existing studies failed to examine the relationship between IBWT policies and corporate R&D activities, and lacked the exploration of the micro-mechanism of IBWT's unintended impact on corporate R&D activities. Through the water delivery of China's South-North Water Transfer Project as a quasi-natural experiment, this study adopts a difference-in-differences approach to scrutinise the unintended impact of IBWT policies on corporate R&D activities. The findings show that IBWT policies can make the water a ‘resource blessing’ by directly improving the water endowment in water-receiving areas, thereby promoting corporate R&D activities. In addition, IBWT policies can also indirectly encourage local governments in water-receiving areas to strengthen the intensity of environmental regulations, ultimately promoting companies to improve R&D activities. Finally, the impacts of IBWT policies on corporate R&D activities in water-receiving areas are heterogeneous. Overall, this study contributes to understanding the complicated relationship between IBWT policies and corporate R&D activities, and provides insights into how IBWT policies affect corporate R&D activities. HIGHLIGHTS The causal relationship between IBWT and R&D activities is examined.; The micro-mechanisms that IBWT affects corporate R&D activities are explored.; IBWT can improve water endowment, thereby promoting corporate R&D activities.; IBWT strengthens environmental regulation, which improves corporate R&D activities.; The impacts of IBWT on corporate R&D activities are heterogeneous.;
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