Technological and Economic Development of Economy

ISSN: 2029-4913 / eISSN: 2029-4921

2023 Volume 29 Issue 1: 141–164
https://doi.org/10.3846/tede.2022.17782

THE EFFECTS OF INTERNATIONAL SANCTIONS

ON GREEN INNOVATIONS

Qiang FU1, Qiang GONG2*, Xin-Xin ZHAO3, Chun-Ping CHANG4#

1School of Economics and Management, Changsha University of Science & Technology, Hunan, China
2Wenlan School of Business, Zhongnan University of Economics and Law, Wuhan, China
3School of Economics and Finance, Xi’an Jiaotong University, Shaanxi, China
4Shih Chien University, Kaohsiung, Taiwan

Received 11 March 2022; accepted 25 August 2022; first published online 24 November 2022

Abstract. Since China is facing a complicated international situation and sustainable develop-
ment requirement at the same time, this paper examines the effects of external uncertainty, in-
ternational sanctions, on green innovations by adopting the system generalized method of mo-
ments (GMM) estimation for 30 provinces (autonomous region and municipalities) from 1997
to 2019. We employ green inventions as the dependent variable and 5 indicators of sanctions
(including unilateral, plurilateral, multilateral, economic, and intensity) as the main explanatory
variables alternately. For further robustness tests, we use substitution variable green utility mod-
els, adopt sub-samples in different regions, change the empirical methodology, and add omitted
variables. We also examine the mechanism effects of three possible channels. The conclusion
is that plurilateral and economic sanctions both present significant negative impacts on green
innovations, whereas China was not affected by unilateral or multilateral sanctions during the
sample period. GDP, interpersonal globalization, and environment are proved to be the possible
channels through which sanctions affect green innovations. Our research findings should assist
Chinese-listed companies suffering from sanctions to make better responses on their way to
green innovations.

Keywords: GMM model, international sanctions, green innovations.

JEL Classification: F5, O3, Q5.

Introduction
Sustainable development is still the theme and direction of the world today, and green in-
novation is an important driving force to promote sustainable development. From the macro
perspective, green innovation is of great significance to improve environmental conditions
and achieve sustainable development. From the micro point of view, green innovation is
also an important way for enterprises to improve production efficiency and enhance core

*Corresponding author. E-mail: [email protected]

#Corresponding author. E-mail: [email protected]

Copyright © 2022 The Author(s). Published by Vilnius Gediminas Technical University

This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.
org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author
and source are credited.
142 Q. Fu et al. The effects of international sanctions on green innovations

competitiveness. However, according to data from World Intellectual Property Organization

(WIPO), green patent applications have been declining since 2014, but their growth rates
after 2017 have risen slowly than before. However, as one of the ten countries with the high-
est number of green patent applications granted by the Patent Cooperation Treaty (PCT),
China had the highest annual growth rate of such applications among these countries at
18.7%, while most of the remaining countries experienced a decline with negative annual
growth rates1. Because China stands out from the rest of the world under the situation of
slow development of green innovation, the study and discussion of its green innovation will
certainly attract attention.
As an external political shock, international sanctions are generally defined as the actual
measures imposed by nations or international organizations that aim to threaten or punish
the target countries and force them to change their political behavior (Lacy & Niou, 2010;
Karimi & Haghpanah, 2015). The influence of sanctions on various factors in different do-
mains have been proven by many researchers, including trade, GDP growth, human rights,
democracy, corruption, energy efficiency, energy security, and environmental performance
(Yang et al., 2009; Neuenkirch & Neumeier, 2015; Peksen, 2009; Peksen & Drury, 2010;
Kamali et al., 2016; Chen et al., 2019; Wen et al., 2020; Fu et al., 2020). Moreover, the inter-
dependence theory shows that the increasing interdependence of countries in many fields
resulting from globalization allows sanctions to take effect very quickly and also provides
more opportunities and means for international sanctions (Cox & Drury, 2006).
Enterprises can be the cause of environmental pollution and should take more respon-
sibility for solving environmental problems (Li et al., 2018). Green innovation is one solu-
tion for corporations to reduce pollution emissions. Although economic globalization brings
more opportunities to Chinese corporations, it also makes them more vulnerable to interna-
tional uncertainties. Thus, when domestic economic growth and recovery face uncertainty
and weak prospects, corporations are likely to cut R&D costs, which may lead to poor green
innovation performance (Narayan, 2021). From the International Patent Classification (IPC)
Green Inventory published World Intellectual Property Organization (WIPO), energy is one
main area of green innovation (Jiao et al., 2020). Under the complex international situation
and the development background of green transformation, energy sustainability is not only a
goal that all countries desire to improve, but also a victim under the influence of international
sanctions. The economic sanctions imposed by Europe and the United States on the energy
trade of some highly energy-dependent countries not only bring uncertainty to the global en-
ergy pattern, but also have a serious impact on the energy upgrading and energy technology
innovation of the target countries, even affecting the progress of global green innovation. It
is thus necessary to consider the effects of these political uncertainties on green innovations,
but scant existing literature explores the relationship between green innovations and political
factors, especially shocks from international conflicts. We look to fill this gap by studying
the impacts of external political shocks on green innovations such as international sanctions.

1 Data source: https://www.wipo.int/export/sites/www/pressroom/en/documents/pr_2020_851_annex.pdf. The top

10 countries in terms of PCT authorized green patent applications in 2019 are Japan, China, the United States,
Germany, South Korea, France, the United Kingdom, the Netherlands, Denmark, and Canada.
Technological and Economic Development of Economy, 2023, 29(1): 141–164 143

The research question of this paper is whether the imposition of international sanctions
will have an impact on green innovation in China. Actually, with increased awareness of cli-
mate change, Chinese government has been enacting stricter environmental protection laws
in recent years – for example, the State Council issued the Opinions on Comprehensively
Strengthening Ecological and Environmental Protection and Resolutely Fighting the Battle
against Pollution in June 2018, and the Guiding Opinions on Building a Modern Environ-
mental Governance System was introduced in March 2020. In addition, China’s new vision
of innovative, coordinated, green, open and inclusive development has attracted much atten-
tion from other countries and provided a plan of action for green and sustainable develop-
ment. Under the pressure of government regulation, Chinese companies need to improve
their green innovation capabilities to meet the government’s environmental requirements.
Nevertheless, as the largest developing country in the world, China is usually the target coun-
try of sanctions and has long been affected by them. Thus, a study of sanctions in the China
context will serve as a guide for other emerging economies in the same situation.
For this issue, we apply the system generalized method of moments (GMM) estima-
tion for 30 provinces (autonomous region and municipalities) in China from 1997 to 2019
with green inventions as the dependent variable and sanction indicators as main explana-
tory variables. The effects on substitution variable-green utility model and the effects on
provinces located in different regions are also investigated for the robustness test. We arrive
at the conclusion that plurilateral and economic sanctions both present significant negative
impacts on green innovations, whereas China was not affected by unilateral and multilateral
sanctions during the sample period and negative effects from sanctions get worse with the
increase of intensity.
Our study contributes to the existing literature in the following aspects. First, to our
knowledge this study test the effects of international sanctions on green innovations by em-
ploying empirical methodology for the first time. We examine the effects of various types of
international sanctions on green innovations: unilateral, plurilateral, multilateral, economic
sanctions, as well as the intensity of sanctions. Second, we employ the two-step system gen-
eralized method of moments (GMM) method to test the effects of international sanctions on
green innovations, by not only considering the dynamic characteristic of the dependent vari-
able, but also solving the endogeneity problem (Blundell & Bond, 1998; Feng et al., 2021b).
Third, besides investigating the effects of international sanctions on green inventions, we fur-
ther estimate the effects on green utility models, which could be regarded as the substitution
variable of green inventions. We also investigate the effects on green innovations of provinces
located in different regions for robustness tests, as well as changing empirical method and
adding omitted variables. Fourth, the sample of the study are provinces in China, which is
different from most previous studies exploring green innovation in developed countries. Due
to considerable differences between developed countries and emerging economies like China
in economic conditions, political background, and other aspects, this paper also adds value to
the green innovation literature. In addition, according to the sanction database, most of the
sanctioned countries are emerging economies like China. This paper has important guiding
significance for other emerging economies to improve green innovation under international
sanctions.
144 Q. Fu et al. The effects of international sanctions on green innovations

The remaining sections of this paper run as follows. Section 1 is the literature review and
hypotheses’ development which proposes two hypotheses based on the existing literature
related to international sanctions and green innovations. Section 2 describes all variables
and introduces empirical method. Section 3 analyzes the empirical results and conducts
robustness tests. The last section offers the conclusion and provides suggestions for govern-
ment policy.

1. Literature review and hypotheses’ development

The effects of international sanctions on green innovations may be induced through eco-
nomic, political, energy, and environmental fields as follows.
From the perspective of the economic field, a gravity estimation employed by Caruso
(2003) shows that international trade will be negatively affected due to the broad scope and
severe actions of sanctions. Yang et al. (2009) presented a similar conclusion that the imposi-
tions of both unilateral and multilateral sanctions show negative impacts on bilateral trade
(both imports and exports). As GDP growth is also one of the objective influences by inter-
national sanctions, Neuenkirch and Neumeier (2015) evaluated the impacts of sanctions on
it and made a comparison between the consequences from U.S. and UN sanctions. There is
no doubt that sanctions targeted for economy decelerate GDP growth, and it is notable that
the consequences of UN sanctions are more severe than U.S. sanctions. Another economic
factor that can be affected by international sanctions is income. There is evidence suggesting
that economic sanctions affect income inequality unfavorably, and the effects vary greatly
due to the different sanction instruments and sanction duration (Afesorgbor & Mahadevan,
2016). A better level of economic development represents a higher degree of innovation abil-
ity (Raghupathi & Raghupathi, 2017), because a country with better economic conditions
could provide more financial support for the improvement of environment-related technolo-
gies (Guloglu & Tekin, 2012), and the increased demand for new products in the process of
economic growth will motivate innovations (Aflaki et al., 2015). Most financial support for
innovation invests in R&D expenditure, and such expenditures directly influence innovation
capacity. The result obtained by Ho et al. (2018) indicated that the R&D input measured by
the number of R&D researchers and amount of R&D expenditures per capita respectively
contributes to the improvement of technical innovation performance. Pradhan et al. (2018)
and Wen et al. (2018) reached the same viewpoint. Foreign direct investment (FDI) is another
factor that may affect innovations as proven by many scholars. Antonietti et al. (2015) and
Law et al. (2018) both pointed out that the technology spillover effect results in a significantly
positive effect of FDI on innovation.
The political field can also be included in the influence channel of international sanctions
on green innovation. Peksen (2009) applied empirical analysis with panel data and found that
international sanctions cause human rights to be ignored by a government, making sanctions
fail to improve human rights. The research result from Islamic countries by Ebrahimi et al.
(2015) is consistent with Peksen (2009). The former indicated that international sanctions
worsen human rights for the people of Iran and Iraq, comprising of life, health, education,
development, and enjoyment of adequate life standards. Human capital is the source of tech-
Technological and Economic Development of Economy, 2023, 29(1): 141–164 145

nological innovation and an important force to promote the development and progress of
science and technology (Dakhli & Clercq, 2004), while education plays a significant role in
the cultivation of innovative and technical talents (Chang et al., 2016). The existing literature
stated that students’ education level positively correlates with independent thinking ability
and exploration spirit (Lau et al., 2015). Roper et al. (2017) and Wang et al. (2019) both pro-
vided empirical support that education has a positive effect on innovation performance. De-
mocracy is another subject that has been studied by many scholars. Some researchers proved
that the level of freedom and democracy in the sanctioned countries will be greatly reduced
under the threat of international sanctions, especially comprehensive sanctions (Peksen &
Drury, 2010). Oechslin (2014) found a similar consequence that international sanctions with
a goal of regime change and democratization are usually ineffective. However, autocracy and
corruption both present an adverse relationship with innovation performance, meaning that
the deeper the degree of autocracy or corruption is, the lower is the innovation level (Wang
et al., 2021; Wen et al., 2018). Another political factor is formal institutions. Lee and Law
(2017) arrived at a conclusion by detailed empirical analysis that the quality improvement of
formal institutions promotes the innovation level of countries. Government intervention also
has obvious effects on innovation, but the results are controversial. Brunnermeier and Cohen
(2003) indicated that government monitoring and enforcement activities on green innovation
do not stimulate innovation performance, which is consistent with Abdullah et al. (2016) in
that government support may be the external barrier to green process innovations and green
system innovation. However, Horbach (2006) held the opposite view that environmental
regulation and environmental management tools implemented by governments encourage
environmental innovation.
As to the energy and environmental fields, western countries often impose sanctions over
oil and energy issues, and so international sanctions have a close correlation with energy.
Ahmadi (2018) obtained the result that the petroleum production of Iran has decreased
after suffering from U.S. and UN sanctions by empirically analyzing a series of data, and the
growth of Iran’s oil and gas sector has also been hampered. Chen et al. (2019) presented that
unilateral, U.S., and economic sanctions show a greater negative effect on energy efficiency
than EU, UN, and non-economic sanctions, while plurilateral sanctions may result in an
unconsidered positive effect due to potential contradictions and disagreements arising from
different interests between imposing parties. Direct evidence that international sanctions
affect the environment has been provided by Fu et al. (2020). The results showed that the
imposition of U.S., EU, unilateral, plurilateral, and economic sanctions lower the Environ-
mental Performance Index of sanctioned countries through a decrease of GDP. There are
also specific factors that may influence innovations in environmental domains. For example,
stringent standards of air pollutants lead to more domestic patenting of pollution abatement
equipment (Popp, 2006), and a collaborative process of aligning the innovations and the
organizational values enables the application of water management innovations (Van Buuren
et al., 2013). Some countries even have drawn up special projects to encourage related inno-
vations, such as Clean Development Mechanism for solid waste management innovation in
India (Potdar et al., 2016) and Waste Recovery Project in Indonesia (Zurbruegg et al., 2012).
146 Q. Fu et al. The effects of international sanctions on green innovations

We thus find indirect evidence of the correlation between international sanctions and
green innovations from studies relevant to the international sanctions’ aftereffects of other
aspects and the influencing factors of green innovations. Therefore, we develop the first hy-
pothesis as follows.
Hypothesis 1: The imposition of international sanctions presents a negative impact on
green innovations.
In order to get a deeper understanding of international sanctions, we also introduce the
types of sanctions and form a classification. Kaempfer and Lowenberg (1999), Bapat and
Morgan (2009), and Kazerooni et al. (2015) classified international sanctions into the follow-
ing categories – unilateral, plurilateral, and multilateral – and analyzed the different impacts
of these sanctions on several fields. It can be proved that multilateral sanctions often work
less on achieving political results since cooperation among members is unable to be strength-
ened through multilateral alliances (Kaempfer & Lowenberg, 1999). An empirical study using
the Hufbauer, Schott, and Elliot dataset did support that unilateral sanctions are often more
effective than multilateral sanctions (Bapat & Morgan, 2009). Yang et al. (2009), Neuenkirch
and Neumeier (2015), Chen et al. (2019) as well as Fu et al. (2020) divided international sanc-
tions into U.S., EU, and UN sanctions based on the sender of sanctions. There is evidence
that the unfavourable effect from U.S. sanctions on GDP growth is smaller than that of UN
sanctions and of less duration (Neuenkirch & Neumeier, 2015). This result is similar to the
U.S. and UN sanctions’ impacts on energy efficiency (Chen et al., 2019).
In the environmental field the sanctions’ effects from various senders are different from
the results of the literature above. Fu et al. (2020) showed that U.S. and EU sanctions signifi-
cantly decrease the Environmental Performance Index, while UN sanctions have no obvious
effect, because other governments are less willing to enforce them and add additional con-
straints to achieve their own purposes. The classifications above are the most common cat-
egories of international sanctions. Our paper consolidates existing classifications of interna-
tional sanctions and fully examine the impacts of seven indicators of international sanctions:
U.S., EU, UN, unilateral, plurilateral, economic sanctions and sanctions intensity. Therefore,
this study uses different indicators of international sanctions as the main explanatory factors
to test the effects on green innovations and develop the next hypothesis.
Hypothesis 2: Different types of international sanctions have different impacts on green
innovations.
Previous studies on green innovation are mostly carried out in the field of environmental
science and engineering. However, green innovation can help achieve ecological and envi-
ronmental goals and also is one of the important factors for the success of economic markets
(Lee & Kim, 2011), because technological breakthroughs usually bring significant economic
benefits (Feng et al., 2021a). The focus on green innovations has increased the number of
studies discussing academic issues in this field with the existing literature mainly examining
environment-related innovations and technologies from three angles: enterprise level, indus-
try level, and macro-level. Alhadid and Abu-Rumman (2014), Abdullah et al. (2016), Li et al.
(2018), and Tang et al. (2018) discussed the topic of green innovations from the perspective
Technological and Economic Development of Economy, 2023, 29(1): 141–164 147

of enterprises or organizations. Research studies at the industry level usually have presented
green innovation from the perspective of an industry or a technology (Brunnermeier & Co-
hen, 2003). The research subjects of green innovation at the macro-level are mainly economic
regions, countries, and the world (Frondel et al., 2007; Horbach, 2006). The literature on the
influencing factors of green innovation occupies a large proportion of the issues related to
green innovation. We note implications from macro-level factors that influence green inno-
vations include economic situation, government research and development (R&D) expen-
diture, education, foreign direct investment (FDI), and government policy (Ho et al., 2018;
Antonietti et al., 2015; Roper et al., 2017). For firms and organizations, firm age, size, and
core competence could affect environmental innovation capacity. Chinese research studies on
green innovation have also focused on the driving mechanism and influencing factors. Zhou
et al. (2021), Luo et al. (2021), Zhou and Wang (2022) analyzed several influencing factors of
green innovation in provinces and cities of China from a macro-level perspective, including
industrial structure, higher productivity, research and development (R&D) efficiency, in-
novation input, foreign direct investment, and environmental regulation. Song et al. (2021),
Tan and Zhu (2022) discussed the green innovation of Chinese listed companies from the
perspective of enterprises.
In summary, the impacts of international sanctions on green innovations overall have
rarely been studied. Most papers of the previous literature discussed the impact of sanctions
on economic, political, energy and other aspects. As for the influencing factors of green in-
novation, most of them are domestic macro-level factors or internal micro-level factors of
enterprises, and international uncertainty is not taken into account.

2. Variables and methodology

2.1. Variables
We employ annual data for a panel of 30 provinces from China (listed in Appendix Table A2)
to investigate the effects of international sanctions on green innovations over the period
1997–20192. The data we employ are mostly from German Institute of Global and Area Stud-
ies (GIGA) Sanctions Dataset, Global Sanctions Database (GSDB) (Felbermayr et al., 2020;
Kirilakha et al., 2021), Green Patent Research Database (GPRD), National Bureau of Statistics,
and China Environmental Statistics Yearbook.

2.1.1. Dependent variable

We employ green inventions as a proxy for green innovations in our study. Green inventions
represent the number of obtained green inventions developed by listed companies in that
region. The data are from Green Patent Research Database (GPRD) of Chinese Listed Com-
panies Management Research Series in Chinese Research Data Services (CNRDS) Platform.
This database is a professional database developed by combining China’s patent data and the
green patent classification number standard published by the World Intellectual Property

2 Since Chongqing, formerly part of Sichuan Province, was raised to municipality status in 1997, in order to divide
the data of provinces and municipalities more clearly and avoid double calculation of data, the sample period in
this study is 1997–2019.
148 Q. Fu et al. The effects of international sanctions on green innovations

Office and presents patent statistics and indicators that are suitable for tracking innovations
in environment-related technologies. They allow the assessment of provinces’ and firms’ in-
novation performances as well as the design of governments’ environmental and innovation
policies.

2.1.2. Explanatory variables

International sanctions can be divided into many forms, and various cases of sanctions may
result in different effects on the target countries (Kazerooni et al., 2015). To examine how
different types of international sanctions impact green innovations with varying effects, Fol-
lowing Portela and Soest (2012), Chen et al. (2019), and Fu et al. (2020), we classify interna-
tional sanctions more specifically, consisting of unilateral, plurilateral, multilateral, economic
sanctions, and the intensity of sanctions. Unilateral refers to whether a country suffer the
international sanctions imposed by either the United States or the European Union sepa-
rately; Plurilateral means whether a country was imposed international sanctions from the
U.S. and the EU simultaneously; Multilateral indicate the international sanctions enforced by
United Nations; Economic represents that the sanctions influence the target state’s economy;
Intensity means the intensity scale of international sanctions.
In order to comprehensively analyze the development of a green innovation market, other
driving factors should also be considered. Several control variables that are proven to affect
the green innovation market are provided in our study. We present them as follows.
GDP: A good economic situation of a country offers financial support for the improve-
ment of environment-related technologies. Research and development (R&D) activities of the
countries subject to international sanctions may be restricted since international sanctions
adversely affect the economy (Zhang, 2008; Hufbauer et al., 2009; Neuenkirch & Neumeier,
2015). Gross domestic product (GDP) is usually used to measure the economic develop-
ment level. Therefore, we follow Zheng et al. (2021) and use GDP to represent the economic
development level for the sample provinces. Based on the gross regional product and gross
regional product index (last year=100), we calculate the real GDP of each province according
to the following formula:
RGDPn = RGDP0 × [1 + (Indexn – 100)%]. (1)

FDI: The effect of foreign direct investment (FDI) on green innovations is a bit compli-
cated. On one hand, FDI may provide more capital support for a country’s innovative R&D
activities; on the other hand, there may exist excessive technological dependences on trans-
national corporation, resulting in countries lacking any motivation to develop environmental
innovations. Wang et al. (2019) investigated the effect of FDI on innovation. Therefore, we
employ the variable FDI, which refers to the ratio of total investment of foreign-invested
enterprises to GDP, to analyze its effect on green innovations.
Education: The cultivation of innovative talents should not be separated from education.
Governments can increase total government expenditure on education to train and support
more R&D specialists for environmental innovation. Moreover, a better education system
Technological and Economic Development of Economy, 2023, 29(1): 141–164 149

also strengthens the awareness of environmental protection (Fu et al., 2020). Therefore, we
choose Education as a control variable in our study, measured by total educational expen-
diture.
Regulation: Because of multiple market failures, investment in environment-related inno-
vation would be inadequate without government intervention (Nemet, 2007). Policy instru-
ments can stimulate the innovation and adoption of environmental technologies. Azevedo
and Pereira (2010) also proved that environmental regulation is a determinant for the adop-
tion of environmental technology and brings huge investment to processes and products
related to the environment. Thus, we calculate the Environmental Regulation Index by the
method of Ren et al. (2020) to set a variable Regulation that measures the intensity of envi-
ronmental regulation in each province. A higher value of Regulation denotes more pollution
emissions and weaker intensity of environmental regulation.
Emission: Stefano et al. (2012) indicated that more market demand will further drive
technological change. Environmental degradation increases the desire for green products
and green consumption and subsequently expands demand in the innovation market. Thus,
it drives people to promote technological development of environmental protection. Knowl-
edge as well as technology can be used to reduce the amount of pollution and the costs of
pollution control (Nentjes & Wiersma, 1988; Kolstad, 2010). We thus take Emission as a
control variable to denote industrial sulfur dioxide (SO2) emissions.

2.2. Empirical methodology

After an international sanction is enacted, we need to estimate what effects its imposition
had. The evaluation looks at whether it is a success or failure. We note the dynamic effect
of the dependent variable that current development of green innovations may on the ba-
sis of previous green technologies, and the endogeneity problems in dynamic models that
technological innovations may weaken the impact of external uncertainties. (Chen et al.,
2021). Thus, we follow Blundell and Bond (1998) to employ the two-step GMM estimation
to examine the effects of international sanctions on green innovations, which combines the
advantages of difference GMM and level GMM estimations. The dynamic panel model of
our study is:
GIi,t =α0 + α1GIi,t-1+ α2Sanctioni,t + α3Controli,t + εi,t, (2)

where GI stands for green inventions, Sanction denotes the main explanatory variables of
international sanction indicators (Plurilateral, Economic, and Intensity) for which we test the
effects by the system GMM model separately and alternately, Controli,t represents the control
variables that influence green innovations, involving GDP, FDI, Education, Regulation, and
Emission, and εi,t is the error term. However, the data of some variables vary greatly and
fluctuate widely among sample provinces. To solve the problem of inconvenient calculation,
the logarithms of green inventions, GDP, Education, and Emission are adopted in this paper
to lower heteroscedasticity and get more concise results (Narayan & Popp, 2010).
150 Q. Fu et al. The effects of international sanctions on green innovations

3. Empirical results
3.1. Main results
Table 1 lists the empirical results of the GMM estimation method for the green innovations3.
We do not report the results of Unilateral and Multilateral since China was not hit by uni-
lateral and multilateral sanctions during 1997–2019. Model 1 to Model 3 show the effects
of 3 indicators of international sanctions on green innovations, consisting of plurilateral,
economic sanctions, and the intensity of sanctions.
As Table 1 shows, the p-value of AR(1) supports the rejection of the null hypothesis, while
AR(2) and Hansen test both seem to validate the null hypothesis, meaning that the GMM
estimation results are valid and credible. The coefficients of the lagged green inventions are
insignificantly positive in all models, which implies that the number of green inventions in
one year will not affect the number obtained in the following year. As to the sanction indica-
tors, we see that the coefficient of the explanatory variable Plurilateral is –23.199 at the 1%
significance level, indicating that the infliction of plurilateral sanctions adversely affects the
number of green inventions, which decreased by about 23, and the negative effect is signifi-
cant. The reason is that the plurilateral sanctions bring unfavourable effects to international
trade and economic growth (Hufbauer et al., 2009; Neuenkirch & Neumeier, 2015), and so
the negative impact will spread to corporate earnings. Academic communication among
R&D specialists is also limited by sanctions. Therefore, plurilateral sanctions reduce the num-
ber of green inventions in Chinese-listed companies through a lack of R&D financial support
and contact restriction of technology and labor (Zhang, 2008; Baffour & Amal, 2011; Zaitseva
et al., 2016). Fu et al. (2020) had a similar result about the effects of plurilateral sanctions on
environmental performance. However, some studies have found different consequences in
which the effects of plurilateral sanctions are sometimes offset when the U.S. and EU imple-
ment sanctions collectively, because countries imposing sanctions may have conflicts of inter-
est due to their primary motivation of respective benefits (Miers & Morgan, 2002; Drezner,
2003), which makes plurilateral sanctions no longer have a negative effect and may even turn
counterproductive (Chen et al., 2019). Similarly, the coefficient of Economic is –22.511 and
similarly significantly negative at the 1% level, implying that the adverse consequence of eco-
nomic sanctions, about 22 fewer inventions, is obvious as well. The negative value of –11.272
in column 3 shows that for every level of increase in sanctions’ intensity, the number of green
inventions falls by about 11. Chen et al. (2019) and Fu et al. (2020) used the same classifica-
tion for sanctions and examine the effects of economic sanctions and sanctions’ intensity on
energy efficiency and environmental performance. Economic sanctions also had negative
impacts on those two, because of the high frequency and the close relationship with key fac-
tors affecting them. The adverse outcomes on energy efficiency and environment worsen as
the intensity increases as well. Thus, the empirical results support our Hypothesis 1. Given
the difference in the degree of negative influences of plurilateral and economic sanctions, our
result also supports Hypothesis 2.
3 As the data show that China has been continuously subjected to plurilateral sanctions by the United States and
the European Union from 1997 to 2019, the values of sanction indicators Plurilateral and Economic are all equal
to 1 and do not change. To make better empirical estimation, we adjust some values to 1.0001 or 0.9999 to obtain
results with a minimum impact. Similarly, the values of Intensity are all equal to 2, and we adjust a few to 1.9999
or 2.0001.
Technological and Economic Development of Economy, 2023, 29(1): 141–164 151

Table 1. Estimation results of the GMM model (Dependent variable: Green inventions)

Variable Model 1 Model 2 Model 3

L.log (GI) 0.102 (0.097) 0.107 (0.093) 0.097 (0.087)
Plurilateral –23.199*** (2.460)
Economic –22.511*** (2.449)
Intensity –11.272*** (1.159)
GDP –0.200 (0.319) –0.093 (0.310) –0.080 (0.289)
FDI 0.296 (0.244) 0.259 (0.215) 0.248 (0.204)
Education 1.914*** (0.289) 1.817*** (0.285) 1.814*** (0.266)
Regulation –0.237 –0.288** –0.289**
(0.151) (0.140) (0.140)
Emission –0.047 –0.062 –0.064
(0.069) (0.064) (0.065)
Observations 579 579 579
AR(1) 0.000 0.000 0.000
AR(2) 0.639 0.603 0.553
Hansen test 0.130 0.259 0.477
Notes: Corrected standard errors are the values in parentheses. *, **, and *** mean significance at the
10%, 5%, and 1% levels, respectively.

We also obtain important information from the results of the control variables. It can be
seen that the coefficient of Education passes the 1% significance level and is positive in all
models, showing that the educational expenditure of provinces will promote the improvement
of green innovation capacity. The higher educational input that a province provides makes
for more financial support toward R&D activities and cultivates more R&D specialists for not
only scientific institutions, but also listed companies (Zhang, 2008). Similarly, the coefficient of
Regulation is significantly negative at the 5% level in most columns. According to the descrip-
tion of this indicator, we know that a higher value of Regulation means weaker environmental
regulation, implying that the lack of pollutants’ regulation restrains green innovations since
companies no longer have to spend money developing new technologies to meet emissions
standards. Except for the control variables above, nothing else is significant in the models.

3.2. Robustness tests

Considering the important factors that may lead to a biased empirical results, heterogene-
ity is a typical one that often exists in economic models (Bettendorf & Dijkgraaf, 2010).
Diversity in the important attributes of the sample provinces (autonomous region and mu-
nicipalities) may lead to great variations in the impacts of international sanctions on green
innovations (Song et al., 2020), especially the different economic conditions and province
situations among different regions. Data show that the east region in China has the highest
per capita GDP, followed by the central region, while the economic development of west
China is relatively weak (Xu et al., 2016). Due to the large output value resulting from the
highest economic level in the east region, green innovation spurs the demand for and the
increase of its energy consumption and pollution emissions. The highest economic openness
152 Q. Fu et al. The effects of international sanctions on green innovations

of the east region also makes it more vulnerable to international sanctions than the central
and west regions. Thus, in order to minimize heterogeneity in our empirical analysis to make
the results more robust, we divide the 30 provinces (autonomous region and municipalities)
into three regions (east, central, and west) based on their economic development level and
geographical locations to further examine the effects of international sanctions. Appendix
Table A2 shows the provinces covered by each region.

Table 2. Estimation results of the GMM model for different regions

Variable Model 1 Model 2 Model 3
East region
L.log(GI) 0.280 (0.256) 0.248 (0.189) 0.281 (0.186)
Plurilateral –29.730** (12.127)
Economic –25.243*** (8.209)
Intensity –13.084** (4.715)
Control variables Yes Yes Yes
Province Yes Yes Yes
Year Yes Yes Yes
Observations 233 233 233
Hansen test 0.159 0.621 0.482
Central region
L.log(GI) 0.032 (0.124) 0.069 (0.089) 0.045 (0.114)
Plurilateral –23.356*** (5.919)
US
EU
Economic –21.035*** (5.059)
Intensity –11.070*** (2.872)
Control variables Yes Yes Yes
Province Yes Yes Yes
Year Yes Yes Yes
Observations 178 178 178
Hansen test 0.511 0.901 0.509
West region
L.log(GI) 0.024 (0.174) 0.021 (0.089) 0.073 (0.093)
Plurilateral ***
–24.618 (4.599)
US
EU
Economic –23.466*** (2.536)
Intensity –11.661*** (1.515)
Control variables Yes Yes Yes
Province Yes Yes Yes
Year Yes Yes Yes
Observations 168 168 168
Sargan test 0.720 0.854 0.498
Notes: Corrected standard errors are the values in parentheses. *, **, and *** mean significance at the
10%, 5%, and 1% levels, respectively.
Technological and Economic Development of Economy, 2023, 29(1): 141–164 153

In Table 2 the p-values of Sargan or Hansen test suggest that our estimation results are
generally reliable. We see that the coefficients of all sanction indicators are significantly nega-
tive, meaning that no matter in which region, international sanctions definitely reduce the
number of green invention patents developed by local listed companies, further validating
our basic results. Moreover, the imposition of international sanctions has the greatest nega-
tive impact on green innovation in the east region, which is more vulnerable to sanctions
due to its high market openness and large-scale foreign investment.
In addition to green inventions, there is a more practical type of patents-green utility
models. We obtain data from GPRD and use a green utility model as a substitution variable
for green invention to confirm that whether our basic empirical results are robust. The p-
values of AR(1), AR(2), and Hansen test ensure the validity of the results in Table 3. In this
table the coefficients of Plurilateral, Economic, and Intensity are all significantly negative, sug-
gesting that the inhibiting effects of these sanctions on green innovation are robust, whereas
the adverse effects on the green utility model are less than that on green inventions. One
finding in this table that the basic empirical results do not show is that the coefficient of the
lagged green utility model is significantly positive at the 5% level in all columns, meaning
that the number of green utility models in one year has a positive effect on the number of
such patents in the following year.
We change the methodology to do another robustness test. Table 4 shows the valid esti-
mation results of difference GMM (DIF-GMM) model, because the Sargan test values of all
models are appropriate. We see that the coefficients of Plurilateral, Economic, and Intensity
are all negative and significant at the 10%, 1%, and 5% levels, respectively. Thus, we conclude
that our basic empirical results are robust through the results of other method.

Table 3. Estimation results of the GMM model (Substitution variable: Green utility models)

Variable Model 1 Model 2 Model 3

L.log (GUM) 0.266** (0.111) 0.266**(0.111) 0.285** (0.109)
Plurilateral –10.979*** (1.203)
Economic –10.710***(1.138)
Intensity –5.350*** (0.594)
GDP 0.506 (0.328) 0.394 (0.318) 0.371 (0.291)
FDI 0.057 (0.116) 0.048 (0.117) 0.023 (0.112)
Education 0.786*** (0.150) 0.820*** (0.141) 0.835*** (0.133)
Regulation –0.067 (0.122) –0.038 (0.118) –0.021 (0.115)
Emission –0.197*** (0.043) –0.203*** (0.041) –0.201*** (0.044)
Province Yes Yes Yes
Year Yes Yes Yes
Observations 600 600 600
AR(1) 0.001 0.000 0.001
AR(2) 0.640 0.681 0.655
Hansen test 0.400 0.407 0.356
Notes: Corrected standard errors are the values in parentheses. *, **, and *** mean significance at the
10%, 5%, and 1% levels, respectively.
154 Q. Fu et al. The effects of international sanctions on green innovations

Table 4. Estimation results of the DIF-GMM model

Variable Model 1 Model 2 Model 3

L.log (GI) 0.317*** (0.099) 0.555*** (0.130) 0.367*** (0.106)
Plurilateral –11.575* (6.981)
Economic –10.469*** (3.742)
Intensity –7.013** (3.400)
GDP 2.132* (1.261) –0.004 (0.153) 1.281** (0.578)
FDI –0.065 (0.086) 0.084 (0.106) –0.091 (0.388)
Education –0.567 (0.400) 0.847** (0.339) 0.103 (0.345)
Regulation –0.403 (0.262) –0.196** (0.075) –0.108 (0.226)
Province Yes Yes Yes
Year Yes Yes Yes
Observations 600 600 600
Sargan test 0.115 0.189 0.566
Notes: Corrected standard errors are the values in parentheses. *, **, and *** mean significance at the
10%, 5%, and 1% levels, respectively.

Finally, another important cause of endogeneity problems is omitted variables (Afesorg-

bor, 2019; Chang et al., 2019). To significantly reduce the undesirable consequence of omitted
variable bias on the empirical results, this paper aims to control the other factors affecting the
green innovation of the provinces as comprehensively as possible to carry out the robustness
test. We add three possible omitted variables, Infra, Finance, and Urban, to do a further test.
Infra refers to provincial infrastructure level assessed by highway mileage, Finance indicates
government expenditure measured by general budget expenditure of local finance, and Urban
is urbanization level calculated by the ratio of non-agricultural population to total population
in each province. As shown in Table 5, the coefficients of all sanction variables are still sig-
nificantly negative after the inclusion of omitted variables, proving that the adverse impacts
from sanctions to green innovations are constant.

3.3. Mechanism tests

There is theoretical evidence for believing that international sanctions threaten the devel-
opment of green innovations. We believe that suffering from international sanctions can
influence green innovations through three possible channels. We therefore analyze how in-
ternational sanctions affect green innovation and then do the mechanism test of these three
channels by using GMM estimation.
First, according to the sanction measures that list the nature of a sanction imposed along
with a basic classification from Portela and Soest (2012), commodity embargo and compre-
hensive trade embargo, the two most common measures of international sanctions, directly
decrease exports and imports of target countries (Hufbauer et al., 2009), while financial
sanctions and aid sanctions decelerate economic growth progress due to the ban on finan-
cial transactions and the suspension of international aid (Neuenkirch & Neumeier, 2015).
Technological and Economic Development of Economy, 2023, 29(1): 141–164 155

Table 5. Estimation results of the GMM model for adding omitted variables

Variable Model 1 Model 2 Model 3

L.log (GI) 0.046 (0.071) 0.059 (0.071) 0.063 (0.066)
Plurilateral –24.133*** (3.316)
Economic –23.837*** (3.145)
Intensity –11.883***
(1.520)
GDP –0.089 (0.242) –0.099 (0.227) –0.068 (0.214)
FDI –0.103 (0.163) –0.071 (0.099) –0.050 (0.103)
Education 1.895*** (0.341) 1.884*** (0.321) 1.867*** (0.306)
Regulation –0.186 (0.134) –0.192 (0.124) –0.212* (0.122)
Infra –0.051 (0.051) –0.052 (0.040) –0.051 (0.042)
Finance –0.025* (0.015) –0.027** (0.013) –0.027** (0.013)
Urban –0.176 (0.441) –0.057 (0.416) –0.094 (0.439)
Province Yes Yes Yes
Year Yes Yes Yes
Observations 600 600 600
Hansen test 0.159 0.791 0.697
Notes: Corrected standard errors are the values in parentheses. *, **, and *** mean significance at the
10%, 5%, and 1% levels, respectively.

Thus, there is literature support for the adverse effect of international sanctions on the eco-
nomic development of a country. Government expenditures are an integral part of economic
growth (Fu & Chang, 2021). Research and development (R&D) activities subject to interna-
tional sanctions may then be restricted due to the scarcity of government financial support
(Zhang, 2008). Thus, we use GDP to measure economic development of the provinces and
do the mechanism test. Panel A in Table 6 shows the results of the first possible channel,
GDP. We see that the coefficients of Plurilateral, Economic, and Intensity are all negative at
the 5% significance level, meaning that the imposition of plurilateral sanctions and economic
sanctions both decrease GDP, and GDP falls even more as sanctions intensify. We conclude
that international sanctions influence green innovation through GDP.
Second, aside from economic and financial sanction measures, other actions such as dip-
lomatic sanctions, flight bans, and visa bans set a form of communication limitation among
R&D specialists of countries that impedes any improvement in the level of interpersonal
globalization, as technological innovations are accelerated by the large-scale global circula-
tion of capital, technology, and labor (Baffour & Amal, 2011; Zaitseva et al., 2016). Therefore,
green innovations may meet with hindrance from the imposition of international sanctions
through restrictions on professional talents, technology, and capital contact. We get the data
of interpersonal globalization from KOF Globalisation Index and examine its mechanism
effect (Gygli et al., 2019). The results in Panel B of Table 6 reveal that the coefficients of the
three sanction variables are all significantly negative at the 1% level, indicating that sanctions
have adverse effects on interpersonal globalization, which is proven to serve as an important
channel between international sanctions and green innovation.
156 Q. Fu et al. The effects of international sanctions on green innovations

Table 6. Estimation results of the influencing channels

Variable Model 1 Model 2 Model 3

Panel A: GDP
L.GDP 0.844*** (0.057) 0.843***(0.058) 0.845*** (0.056)
Plurilateral –0.411** (0.158)
Economic –0.416** (0.158)
Intensity –0.206** (0.078)
Control variables Yes Yes Yes
Province Yes Yes Yes
Year Yes Yes Yes
Observations 600 600 600
Hansen test 0.246 0.188 0.270
Panel B: Interpersonal globalization
L. Inter 0.851*** (0.031) 0.843*** (0.025) 0.843*** (0.025)
Plurilateral –68.858*** (6.877)
Economic –61.851*** (6.154)
Intensity –30.924*** (3.077)
Control variables Yes Yes Yes
Province Yes Yes Yes
Year Yes Yes Yes
Observations 600 600 600
Hansen test 0.668 0.365 0.365
Panel C: Environment
L. Environment 0.398** (0.175) 1.365*** (0.056) 0.350* (0.204)
(0.175) (0.056) (0.204)
Plurilateral –17.278*** (5.796)
Economic 0.856 (0.521)
Intensity –9.191*** (3.122)
Control variables Yes Yes Yes
Province Yes Yes Yes
Year Yes Yes Yes
Observations 600 600 600
Hansen test 0.137 0.434 0.169
Notes: Corrected standard errors are the values in parentheses. *, **, and *** mean significance at the
10%, 5%, and 1% levels, respectively.

Third, international sanctions can be also counterproductive for environmental quality

with undesirable environmental consequences, and the reduction of green consumption will
lead to less of a positive effect of environmental protection since sanctions negatively affect
income (Kolstad, 2016). Chen et al. (2019) prove directly that energy efficiency, the important
factor of environmental pollution, decreases when a country is under sanctions. Moreover,
Technological and Economic Development of Economy, 2023, 29(1): 141–164 157

international sanctions also threaten the outcome of environmental performance, including

environmental health and ecosystem vitality (Fu et al., 2020). Environmental degradation
forces people to improve the ability and technology of environmental protection. Hence,
technological development is driven from the increase of market demand caused by the
international sanctions (Stefano et al., 2012). In order to test the mechanism effect of envi-
ronmental quality as market demand for green innovation, we utilize SO2 emissions to evalu-
ate environmental quality. As Panel C in Table 6 shows, the coefficients of Plurilateral and
Intensity are negative at the 1% significance level, which means the effect of environmental
quality is relatively complicated. Sanctions will make high-polluting enterprises with foreign
investment reduce output and emissions due to the withdrawal of funds, thus decreasing
the demand for green innovation, which means this may also worsen the environment and
stimulate green innovation.

Conclusions and future direction

There are many researches in the existing literature that have examined the impacts of inter-
national sanctions on various domains in the target countries, prompting our paper to fill the
gap in the domain of green innovation. We prove herein that the imposition of international
sanctions has negative impacts on green innovation by using the GMM model with data
from 1997 to 2019 for a sample of 30 provinces (autonomous region and municipalities) in
China. We then test the effects of international sanctions on provinces located in three differ-
ent regions and also investigate the effects on a substitution variable-green utility model for
the robustness test. The basic result of green invention shows that plurilateral, U.S., EU, and
economic sanctions negatively affect the number of green inventions developed by a listed
company’s inventors in China, and the impact deepens with the increase in the intensity scale
of sanctions, while listed companies in each province are not affected by unilateral and UN
sanctions since China was not subject to either type of sanction during the sample period.
Our research further finds that some control variables influence green innovations sig-
nificantly. The increase of educational expenditure and the regulation of pollutant emissions
both promote environmental technology innovation. As to provinces in different regions,
the results present that the impositions of international sanctions have significantly inhibit-
ing effects on green innovations in any region, with the greatest impact in the east region.
Not just for green invention patents, international sanctions also have adverse effects on the
substitution variable-green utility model patents.
From the conclusions above, we offer some policy suggestions for green innovations in
China. First, due to the disagreements and contradictions on the distribution of interests
between two different sanction senders, Chinese-listed companies subjected to sanctions can
minimize the destructiveness and effectiveness of international sanctions by raising questions
between the imposing countries that exhibit potential contradictions. They can also look for
opportunities to conduct international cooperation in capital, technology, and labor with
companies in other countries to promote R&D activities and environmental technological
innovations.
158 Q. Fu et al. The effects of international sanctions on green innovations

Second, the effects brought by the control variables Education and Regulation also pro-
vide suggestions. Under a favorable economic development situation, the provincial govern-
ments can increase their total expenditure on education, which would encourage more R&D
specialists to carry out green innovation activities, and also help train more technological
talents for green innovation since a better education cultivates a deeper innovative capacity
and awareness of environmental protection. The provincial governments should strengthen
the regulation of pollutants so that they can play a strong guiding role in green innovation.
Third and finally, green innovation in the east region is most adversely affected by the
sanctions, because of its large-scale foreign investment and foreign trade. Thus, governments
in the east region should instead actively help foreign investment transfer to industries and
companies with low environmental pollution or environmental technology enterprises so as
to stabilize the scale and quality of green innovation. In summary, our study is the first in
the literature to provide evidence that international sanctions affect green innovations. We
hope to help China seriously deal with the threat produced by the imposition of international
sanctions and to promote environmental technologies and innovation activities during any
tensions in international relations.
Some limitations of this study provide direction and make room for future research.
Since China was not hit by unilateral and UN sanctions during 1997–2019, we cannot fur-
ther compare the consequences of sanctions with different characteristics on China. Future
research may contribute to this topic by taking into consideration other sanctioned countries
or other sanction categories.

Funding
Scientific research project of Hunan Educational Department Grant number: 18K048.

References

Abdullah, M., Zailani, S., Iranmanesh, M., & Jayaraman, K. (2016). Barriers to green innovation initia-
tives among manufacturers: The Malaysian case. Review of Managerial Science, 10(4), 1–27.
https://doi.org/10.1007/s11846-015-0173-9
Afesorgbor, S. K. (2019). The impact of economic sanctions on international trade: How do threat-
ened sanctions compare with imposed sanctions? European Journal of Political Economy, 56, 11–26.
https://doi.org/10.1016/j.ejpoleco.2018.06.002
Afesorgbor, S. K., & Mahadevan, R. (2016). The impact of economic sanctions on income inequality of
target states. World Development, 83, 1–11. https://doi.org/10.1016/j.worlddev.2016.03.015
Aflaki, S., Basher, S. A., & Masini, A. (2015). Does economic growth matter? Technology-push, de-
mand-pull and endogenous drivers of innovation in the renewable energy industry. Social Science
Electronic Publishing, 5(28), 6393–6400.
Ahmadi, A. (2018). The impact of economic sanctions and the JCPOA on energy sector of Iran. Global
Trade and Customs Journal, 13(5), 198–223. https://doi.org/10.54648/GTCJ2018023
Alhadid, A. Y., & Abu-Rumman, A. H. (2014). The impact of green innovation on organizational
performance, environmental management behavior as a moderate variable: An analytical study on
Nuqul Group in Jordan. International Journal of Business & Management, 9(7), 51–58.
https://doi.org/10.5539/ijbm.v9n7p51
Technological and Economic Development of Economy, 2023, 29(1): 141–164 159

Antonietti, R., Bronzini, R., & Cainelli, G. (2015). Inward greenfield FDI and innovation. Economia E
Politica Industriale, 42(1), 93–116. https://doi.org/10.1007/s40812-014-0007-9
Azevedo, A. M. M. de, & Pereira, N. M. (2010). Environmental regulation and innovation in high-pollu-
tion industries: A case study in a Brazilian refinery. International Journal of Technology Management
& Sustainable Development, 9(2), 133–148. https://doi.org/10.1386/tmsd.9.2.133_1
Baffour, A, G., & Amal, M. (2011). Impact of globalization. European Business Review, 23(1), 120–132.
https://doi.org/10.1108/09555341111098026
Bapat, N. A., & Morgan, C. T. (2009). Multilateral versus unilateral sanctions reconsidered: A test using
new data. International Studies Quarterly, 53(4), 1075–1094.
https://doi.org/10.1111/j.1468-2478.2009.00569.x
Bettendorf, L., & Dijkgraaf, E. (2010). Religion and income: heterogeneity between countries. Journal
of Economic Behavior & Organization, 74(1–2), 12–29. https://doi.org/10.1016/j.jebo.2010.02.003
Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data
models. Journal of Econometrics, 87(1), 115–143. https://doi.org/10.1016/S0304-4076(98)00009-8
Brunnermeier, S. B., & Cohen, M. A. (2003). Determinants of environmental innovation in us manu-
facturing industries. Journal of Environmental Economics and Management, 45(2), 278–293.
https://doi.org/10.1016/S0095-0696(02)00058-X
Caruso, R. (2003). The impact of international economic sanctions on trade: An empirical analysis.
Peace Economics, Peace Science and Public Policy, 9(2). https://doi.org/10.2202/1554-8597.1061
Chang, F., Min, W., Shi, Y., Kenny, K., & Loyalka, P. (2016). Educational expectations and dropout
behavior among junior high students in rural China. China & World Economy, 24(3), 67–85.
https://doi.org/10.1111/cwe.12159
Chang, X., Chen, Y., Wang, S. Q., Zhang, K., & Zhang, W. (2019). Credit default swaps and corporate
innovation. Journal of Financial Economics, 134(2), 474–500.
https://doi.org/10.1016/j.jfineco.2017.12.012
Chen, D., Hu, H. Q., & Zheng, M. B. (2021). How does energy production respond to the COVID-19
pandemic? Evidence from China. Asian Economics Letters, 2(2). https://doi.org/10.46557/001c.22324
Chen, Y. E., Fu, Q., Zhao, X. X, Yuan, X. M., & Chang, C. P. (2019). International sanctions’ impact on
energy efficiency in target states. Economic Modelling, 82, 21–34.
https://doi.org/10.1016/j.econmod.2019.07.022
Cox, D. G., & Drury, A. C. (2006). Democratic sanctions: Connecting the democratic peace and econom-
ic sanctions. Journal of Peace Research, 43(6), 709–722. https://doi.org/10.1177/0022343306068104
Dakhli, M., & Clercq, D. D. (2004). Human capital, social capital, and innovation: A multi-country
study. Entrepreneurship & Regional Development, 16(2), 107–128.
https://doi.org/10.1080/08985620410001677835
Drezner, D. (2003). The hidden hand of economic coercion. International Organization, 57(3), 643–659.
https://doi.org/10.1017/S0020818303573052
Ebrahimi, M., Jalalian, A., & Esfandyari, L. (2015). The impacts of economic sanctions on human rights
in countries of Iran and Iraq. World Scientific News, 10, 12–27.
Felbermayr, G., Kirilakha, A., Syropoulos, C., Yalcin, E., & Yotov, Y. V. (2020). The global sanctions data
base. European Economic Review, 129, 103561. https://doi.org/10.1016/j.euroecorev.2020.103561
Feng, G. F., Wang, Q. J., Chu, Y., Wen, J., & Chang, C. P. (2021a). Does the shale gas boom change the
natural gas price-production relationship? Evidence from the U.S. market. Energy Economics, 93,
104327. https://doi.org/10.1016/j.eneco.2019.03.001
Feng, G. F., Yang, H. C., Gong, Q., & Chang, C. P. (2021b). What is the exchange rate volatility response
to COVID-19 and government interventions? Economic Analysis and Policy, 69, 705–719.
https://doi.org/10.1016/j.eap.2021.01.018
160 Q. Fu et al. The effects of international sanctions on green innovations

Frondel, M., Horbach, J., & Rennings, K. (2007). End-of-pipe or cleaner production? An empirical
comparison of environmental innovation decisions across OECD countries. Business Strategy and
the Environment, 16(8), 571–584. https://doi.org/10.1002/bse.496
Fu, Q., & Chang, C. P. (2021). How do pandemics affect government expenditures? Asian Economics
Letters, 2(1). https://doi.org/10.46557/001c.21147
Fu, Q., Chen, Y. E., Jang, C. L., & Chang, C. P. (2020). The impact of international sanctions on envi-
ronmental performance. Science of The Total Environment, 745, 141007.
https://doi.org/10.1016/j.scitotenv.2020.141007
Guloglu, B., & Tekin, R. B. (2012). A panel causality analysis of the relationship among research and
development, innovation, and economic growth in high-income OECD countries. Eurasian Eco-
nomic Review, 2(1), 32–47.
Gygli, S., Florian, H., Niklas, P., & Jan-Egbert, S. (2019): The KOF Globalisation Index – revisited.
Review of International Organizations, 14(3), 543–574. https://doi.org/10.1007/s11558-019-09344-2
Ho, C. Y., Huang, S., Shi, H., & Wu, J. (2018). Financial deepening and innovation: The role of political
institutions. World Development, 109, 1–13. https://doi.org/10.1016/j.worlddev.2018.02.022
Horbach, J. (2006). Determinants of environmental innovation – New evidence from German panel
data sources. Research Policy, 37(1), 163–173. https://doi.org/10.1016/j.respol.2007.08.006
Hufbauer, G., Schott, J., Elliott, K. A., & Oegg, B. (2009). Economic sanctions reconsidered: History and
current policy (3rd ed.). Institute for International Economics, Washington, DC.
Jiao, J., Chen, C., & Bai, Y. (2020). Is green technology vertical spillovers more significant in mitigating
carbon intensity? Evidence from Chinese industries. Journal of Cleaner Production, 257, 120354.
https://doi.org/10.1016/j.jclepro.2020.120354
Kaempfer, W. H., & Lowenberg, A. D. (1999). Unilateral versus multilateral international sanctions: A
public choice perspective. International Studies Quarterly, 43(1), 37–58.
https://doi.org/10.1111/0020-8833.00110
Kamali, T., Mashayekh, M., & Jandaghi, G. (2016). The impact of economic sanctions on corruption in
target countries: A cross country study. World Scientific News, 45(2), 276–291.
Karimi, M., & Haghpanah, S. (2015). The effects of economic sanctions on disease specific clinical
outcomes of patients with thalassemia and hemophilia in Iran. Health Policy, 119(2), 239–243.
https://doi.org/10.1016/j.healthpol.2014.12.011
Kazerooni, A., Ghorbani, A., & Saghafi, R. (2015). A study of unilateral and multilateral sanctions
effectiveness on Iran’s non-oil foreign trade products. Quarterly Journal of Applied Theories of Eco-
nomics, 2(1), 83–98.
Kirilakha, A., Felbermayr, G., Syropoulos, C., Yalcin, E., & Yotov, Y. V. (2021). The Global Sanctions
Data Base: An update that includes the years of the Trump presidency. In P. A. G. van Bergeijk
(Ed.), Research handbook on economic sanctions (pp. 62–106). Edward Elgar.
https://doi.org/10.4337/9781839102721.00010
Kolstad, C. D. (2010). Regulatory choice with pollution and innovation. Social Ence Electronic Publish-
ing, 73(1), 65–78.
Kolstad, C. D. (2016). Environmental economics (2nd ed., C. Peng & X. F. Wang, Trans.). China Renmin
University Press.
Lacy, D., & Niou, E. M. S. (2010). A theory of economic sanctions and issue linkage: The roles of prefer-
ences, information, and threats. Journal of Politics, 66(1), 25–42.
https://doi.org/10.1046/j.1468-2508.2004.00140.x
Lau, C. K. M., Yang, F. S., Zhang, Z., & Leung, V. K. K. (2015). Determinants of innovative activities:
Evidence from Europe and central Asia region. The Singapore Economic Review, 60(01), 1550004.
https://doi.org/10.1142/S0217590815500046
Technological and Economic Development of Economy, 2023, 29(1): 141–164 161

Law, S. H., Lee, W. C., & Singh, N. (2018). Revisiting the finance-innovation nexus: Evidence from a
non-linear approach. Journal of Innovation & Knowledge, 3(3), 143–153.
https://doi.org/10.1016/j.jik.2017.02.001
Lee, K. H., & Kim, J. W. (2011). Integrating suppliers into green product innovation development: An
empirical case study in the semiconductor industry. Business Strategy & the Environment, 20(8),
527–538. https://doi.org/10.1002/bse.714
Lee, W. C., & Law, S. H. (2017). Roles of formal institutions and social capital in innovation activities:
A cross-country analysis. Global Economic Review, 46(3), 203–231.
https://doi.org/10.1080/1226508X.2017.1292859
Li, D., Huang, M., Ren, S., Chen, X., & Ning, L. (2018). Environmental legitimacy, green innovation,
and corporate carbon disclosure: Evidence from CDP China 100. Journal of Business Ethics, 150(4),
1089–1104. https://doi.org/10.1007/s10551-016-3187-6
Luo, Y., Salman, M., & Lu, Z. (2021). Heterogeneous impacts of environmental regulations and foreign
direct investment on green innovation across different regions in China. Science of The Total Envi-
ronment, 759(2), 143744. https://doi.org/10.1016/j.scitotenv.2020.143744
Miers, A. C., & Morgan, C. T. (2002). Multilateral sanctions and foreign policy success: Can too many cooks
spoil the broth? International Interactions, 28(2), 117–136. https://doi.org/10.1080/03050620212099
Narayan, P. K., & Popp, S. (2010). A new unit root test with two structural breaks in level and slope at
unknown time. Journal of Applied Statistics, 37(9), 1425–1438.
https://doi.org/10.1080/02664760903039883
Narayan, P. K. (2021). Covid-19 research outcomes: An agenda for future research. Economic Analysis
and Policy, 71, 439–445. https://doi.org/10.1016/j.eap.2021.06.006
Nemet, G. F. (2007). Policy and innovation in low-carbon energy technologies [PhD Dissertation]. Energy
and Resources Group. Berkeley, CA, University of California.
Nentjes, A., & Wiersma, D. (1988). Innovation and pollution control. International Journal of Social
Economics, 15(3/4), 51–70. https://doi.org/10.1108/eb014103
Neuenkirch, M., & Neumeier, F. (2015). The impact of UN and US economic sanctions on GDP growth.
European Journal of Political Economy, 40, 110–125. https://doi.org/10.1016/j.ejpoleco.2015.09.001
Oechslin, M. (2014). Targeting autocrats: Economic sanctions and regime change. European Journal of
Political Economy, 36, 24–40. https://doi.org/10.1016/j.ejpoleco.2014.07.003
Peksen, D. (2009). Better or worse? The effect of economic sanctions on human rights. Journal of Peace
Research, 46(1), 59–77. https://doi.org/10.1177/0022343308098404
Peksen, D., & Drury, A. C. (2010). Coercive or corrosive: The negative impact of economic sanctions
on democracy. International Interactions, 36(3), 240–264.
https://doi.org/10.1080/03050629.2010.502436
Popp, D. (2006). International innovation and diffusion of air pollution control technologies: The effects
of NOX and SO2 regulation in the US, Japan, and Germany. Journal of Environmental Economics &
Management, 51(1), 46–71. https://doi.org/10.1016/j.jeem.2005.04.006
Portela, C., & Soest, C. V. (2012). GIGA Sanctions dataset codebook. Version 18 June 2012. German
Institute for Global and Area Studies.
Potdar, A., Singh, A., Unnikrishnan, S., Naik, N., Naik, M., & Nimkar, I. (2016). Innovation in solid
waste management through Clean Development Mechanism in India and other countries. Process
Safety and Environmental Protection, 101, 160–169. https://doi.org/10.1016/j.psep.2015.07.009
Pradhan, R. P., Arvin, M. B., Nair, M., Bennett, S. E., Bahmani, S., & Hall, J. H. (2018). Endogenous
dynamics between innovation, financial markets, venture capital and economic growth: Evidence
from Europe. Journal of Multinational Financial Management, 45, 15–34.
https://doi.org/10.1016/j.mulfin.2018.01.002
162 Q. Fu et al. The effects of international sanctions on green innovations

Raghupathi, V., & Raghupathi, W. (2017). Innovation at country-level: Association between economic
development and patents. Journal of Innovation and Entrepreneurship, 6(1), 1–20.
https://doi.org/10.1186/s13731-017-0065-0
Ren, X. S., Liu, Y. J., & Zhao, G. H. (2020). The impact and transmission mechanism of economic ag-
glomeration on carbon intensity. China Population, Resources and Environment, 30(4), 95–106 (in
Chinese).
Roper, S., Love, J. H., & Bonner, K. (2017). Firms’ knowledge search and local knowledge externalities in
innovation performance. Research Policy, 46(1), 43–56. https://doi.org/10.1016/j.respol.2016.10.004
Song, C. Q., Chang, C. P., & Gong, Q. (2020). Economic growth, corruption, and financial development:
Global evidence. Economic Modeling, 94, 822–830. https://doi.org/10.1016/j.econmod.2020.02.022
Song, W., Yu, H., & Xu, H. (2021). Effects of green human resource management and managerial
environmental concern on green innovation. European Journal of Innovation Management, 24(3),
951–967. https://doi.org/10.1108/EJIM-11-2019-0315
Stefano, G. D., Gambardella, A., & Verona, G. (2012). Technology push and demand pull perspec-
tives in innovation studies: Current findings and future research directions. Research Policy, 41(8),
1283–1295. https://doi.org/10.1016/j.respol.2012.03.021
Tan, Y., & Zhu, Z. (2022). The effect of ESG rating events on corporate green innovation in China:
The mediating role of financial constraints and managers’ environmental awareness. Technology in
Society, 68, 101906. https://doi.org/10.1016/j.techsoc.2022.101906
Tang, M., Walsh, G., Lerner, D., Fitza, M. A., & Li, Q. (2018). Green innovation, managerial concern
and firm performance: An empirical study. Business Strategy & the Environment, 27(1), 39–51.
https://doi.org/10.1002/bse.1981
Van Buuren, A., Eshuis, J., & Bressers, N. (2013). The governance of innovation in Dutch regional
water management: Organizing fit between organizational values and innovative concepts. Public
Management Review, 17(5), 679–697. https://doi.org/10.1080/14719037.2013.841457
Wang, Q. J., Feng, G. F., Chen, Y. E., Wen, J., & Chang, C. P. (2019). The impacts of government ideology
on innovation: What are the main implications? Research Policy, 48(5), 1232–1247.
https://doi.org/10.1016/j.respol.2018.12.009
Wang, Q. J., Feng, G. F., Wang, H. J., & Chang, C. P. (2021). The impacts of democracy on innovation:
Revisited evidence. Technovation, 108, 102333. https://doi.org/10.1016/j.technovation.2021.102333
Wen, J., Wang, Q. J., Feng, G. F., Chen, S. W, & Chang, C. P. (2018). Corruption and innovation: Linear
and non-linear investigations of OECD countries. The Singapore Economic Review, 1–27.
Wen, J., Zhao, X. X., Wang, Q. J., & Chang, C. P. (2020). The impact of international sanctions on en-
ergy security. Energy & Environment, 32(3), 458–480. https://doi.org/10.1177/0958305X20937686
Xu, S. C., He, Z. X., Long, R. Y., & Shen, W. X., Ji, S.-B., & Chen, Q.-B. (2016). Impacts of economic
growth and urbanization on CO2 emissions: Regional differences in China based on panel estima-
tion. Regional Environmental Change, 16(3), 777–787. https://doi.org/10.1007/s10113-015-0795-0
Yang, J., Askari, H., Forrer, J., & Zhu, L. (2009). How do US economic sanctions affect EU’s trade with tar-
get countries? World Economy, 32(8), 1223–1244. https://doi.org/10.1111/j.1467-9701.2009.01190.x
Zaitseva, N. A., Larionova, A. A., Yumatov, K. V., Korsunova, N. M., & Dmitrieva, N. V. (2016). Assess-
ment of the impact of globalization on the introduction of innovative technology companies in the
hospitality industry. International Journal of Environmental & Science Education, 11(14), 7176–7185.
Zhang, G. L. (2008, October). Economic analysis of government financial support for scientific and tech-
nological innovation. In 2008 4th International Conference on Wireless Communications, Networking
and Mobile Computing (pp. 1–4). Dalian, China. IEEE. https://doi.org/10.1109/WiCom.2008.2648
Zheng, M. B., Feng, G. F., Jang, C. L., Chang, C. P. (2021). Terrorism and green innovation in renewable
energy. Energy Economics, 104, 105695. https://doi.org/10.1016/j.eneco.2021.105695
Technological and Economic Development of Economy, 2023, 29(1): 141–164 163

Zhou, F., & Wang, X. (2022). The carbon emissions trading scheme and green technology innovation
in China: A new structural economics perspective. Economic Analysis and Policy, 74(C), 365–381.
https://doi.org/10.1016/j.eap.2022.03.007
Zhou, X., Yu, Y., Yang, F., & Shi, Q. (2021). Spatial-temporal heterogeneity of green innovation in
China. Journal of Cleaner Production, 282(1), 124464. https://doi.org/10.1016/j.jclepro.2020.124464
Zurbruegg, C., Gfrerer, M., Ashadi, H., Brenner, W., & Kueper, D. (2012). Determinants of sustainability
in solid waste management – the Gianyar Waste Recovery Project in Indonesia. Waste Management,
32(11), 2126–2133. https://doi.org/10.1016/j.wasman.2012.01.011
164 Q. Fu et al. The effects of international sanctions on green innovations

APPENDIX

Table A1. Definitions of variables and data sources

Variable Definition Source

Unilateral whether a country suffer the international sanctions GIGA Sanctions
imposed by either the U.S. or the EU separately Dataset & GSDB
Plurilateral whether a country was imposed international GIGA Sanctions
sanctions from the U.S. and the EU simultaneously Dataset & GSDB
Multilateral whether a country was imposed international GIGA Sanctions
sanctions from United Nations Dataset & GSDB
Economic international sanctions that affect the economy GIGA Sanctions
of the target country Dataset & GSDB
Intensity formal intensity scale of sanctions GIGA Sanctions
Dataset & GSDB
Green number of green inventions authorized in the Green Patent
inventions province in that year Research Database
Green utility number of green utility models authorized in the Green Patent
models province in that year Research Database
GDP real gross domestic product in the province National Bureau of Statistics
FDI ratio of total investment of foreign-invested National Bureau of Statistics
enterprises to GDP
Education total educational expenditure in the province National Bureau of Statistics
Regulation intensity of environmental regulation in the province China Environmental
Statistics Yearbook
Emission industrial sulfur dioxide (SO2) emissions China Environmental
Statistics Yearbook

Table A2. List of sample provinces

Province (autonomous region and municipality)

Anhui Beijing Fujian
Gansu Guangdong Guangxi
Guizhou Hainan Hebei
Henan Heilongjiang Hubei
Hunan Jilin Jiangsu
Jiangxi Liaoning Inner Mongolia
Ningxia Qinghai Shandong
Shanxi Shaanxi Shanghai
Sichuan Tianjin Xinjiang
Yunnan Zhejiang Chongqing
Province (autonomous region and municipality) in different regions
East region Beijing, Fujian, Guangdong, Guangxi, Hainan, Hebei, Jiangsu, Liaoning,
Shandong, Shanghai, Tianjin, Zhejiang
Central region Anhui, Henan, Heilongjiang, Hubei, Hunan, Jilin, Jiangxi, Inner Mongolia, Shanxi,
West region Gansu, Guizhou, Ningxia, Qinghai, Shaanxi, Sichuan, Xinjiang, Yunnan,
Chongqing