Environmental target constraints and enterprise export competitiveness—Exploring the sustainable development of China's external trade

Balancing export growth and environmental protection is the key to promoting China's long‐term sustainable development. Based on the multi‐dimensional panel data, we conducted a case study using Chinese prefecture‐level city and firm‐level data from 2004 to 2014 to examine the impact of local government environmental target constraints on enterprises' export competitiveness. The results show that local government environmental target constraints have a significant negative effect on the export competitiveness of enterprises, and this finding still holds after a series of robustness tests and overcoming endogeneity. The mechanism test shows that there is both the cost effect of the “traditional school” and the innovation compensation effect of the “Porter hypothesis” in the effect of local government environmental target constraints on the export competitiveness of enterprises. The sub‐sample heterogeneity regressions found that the negative effects of local government environmental target constraints on polluting industries, processing trade enterprises, and labor and capital‐intensive industries are significantly weaker than those on clean industries, general trade enterprises, and technology‐ intensive industries. The research provides empirical support for the government to develop environmental policies to secure a win‐win situation of environmental protection and export growth.