4.1. The Impact of ER on Business Performance
In order to determine the impact of ER on business performance, the model 1 defines business performance as the dependent variable and ER as the independent variable. The regression results are shown in
Table 4 below. The maximum value of VIF is 1.073, indicating that there is no severe collinearity.
There is a significant negative correlation between ER and business performance (β = −0.112,
p < 0.01), and Hypothesis 1 is supported. This shows that under the strong ER, the business performance of enterprises is not good. This result is contrary to the PH and consistent with the research results of Plamer (1995), Rubashkina et al. (2015) and Zhu et al. (2019) [
2,
8,
9].
In addition, the industry characteristics and business performance have a significant positive correlation (β = 0.07, p < 0.05). That is, enterprises in the pollution industry can achieve better business performance, which is consistent with the actual situation for China and most developing countries, because the economic foundation and the level of science and technology in these countries is poorer, meaning companies with competitive advantages are concentrated in heavy pollution industries. At the same time, the enterprise nature has a significant negative relationship with the business performance (β = −0.204, p < 0.001), because private enterprises have higher management efficiency than state-owned enterprises in China, so they can obtain better business performance.
4.2. The Mediating Effect of Technological Innovation
In order to test the mediating effect of technological innovation, model 2 and model 3 are established in this paper. According to the regression results in
Table 5, VIF values of corresponding variables in both models are close to 1 and far less than 5, indicating that there is no serious collinearity between variables.
Model 2 shows the regression result of technological innovation and ER, indicating that there is a significant negative correlation between ER and technological innovation input (β = −0.394, p < 0.001), and Hypothesis 2 is supported, indicating that ER may constrain technological innovation input of enterprises.
Model 3 adds technological innovation on the basis of model 1. The results show that there is significantly positive correlation between technological innovation and business performance (β = 0.040, p < 0.001), and Hypothesis 3 is supported. In addition, the technology innovation regression coefficient in model 3 (β = 0.04, p < 0.001), and the ER regression coefficient in model 1 and model 2 (β = −0.112, p < 0.001; β = −0.394, p < 0.001) are significant. Hypothesis 4 is supported, indicating that technological innovation has a mediating effect on the relationship between ER and business performance, that is, ER will cause enterprises to reduce investment in technological innovation, thus leading to poor business performance.
More importantly, after adding technological innovation, the significance degree of negative correlation between ER and business performance is reduced (β = −0.096, p < 0.05), indicating that enterprises can reduce the adverse impact of ER on business performance through technological innovation investment.
In addition, local dummy variables are positively correlated with technological innovation (β = −0.301, p < 0.001), because enterprises in developed regions have relative resource advantages, and are also facing fiercer market competition. So, they invest more in technological innovation. The enterprise nature is positively correlated with technological innovation (β = 0.388, p < 0.001) and negatively correlated with its business performance (β = −0.022, p < 0.001), which indicates that state-owned enterprises have obvious resource advantages and relatively large investment in technological innovation. However, the advantage of innovative resources has not been transformed into a market competitive advantage because it is limited by low management efficiency.
4.3. The Moderating Effect of ERF
Finally, model 4 is established in order to check the moderating effect of ERF, and the regression results are shown in
Table 6. Although the VIF value of the ERF and interactive item of ERF and technological innovation is large relatively, which is a collinearity problem caused by the interaction term and has little influence on the research conclusion.
The interpretation degree of model 4 (R
2 = 0.031, F = 12.119,
p < 0.001) is improved compared with model 3 (R
2 = 0.029, F = 12.783,
p < 0.001). Although the increase of R
2 is small (0.2%) after the addition of the interaction term, Chaplin (1991) pointed out that if the sample size is large enough and the interaction term coefficient is significant in the multiple regression, the conclusion would be valid even with a small R
2 in the test of the regulation effect [
49]. As
Table 6 shows, the interaction term between ERF and technological innovation is significant (β = −0.008,
p < 0.01), which proves that ERF has a negative moderating effect on the mediating effect of technological innovation, and Hypothesis 5 is supported.
In order to further test the regulatory effect of ERF, this paper takes the median of ERF as the boundary, divides the samples into a low ERF group and high ERF group. The mediating effect of technological innovation in these two groups is researched in this paper. Referring to Wen & Ye (2014), hierarchical regression analysis is used to test the mediating effect [
50].
Table 7 shows the regression results of the group of low ERF. The regression coefficients of ER in model 5 and model 6 (β = −0.176,
p < 0.05); β = −0.572,
p < 0.001), and the technological innovation (β = 0.059,
p < 0.001) in model 7 are significant. It shows that under the inflexible ER, technological innovation has a significant mediating effect on the relationship between ER and business performance.
The regression results of the group of high ERF are shown in
Table 8. As model 10 shows, the regression coefficient of technical innovation is not significant (β = 0.14,
p > 0.001), and it fails to pass the sobel test. The model also shows that under the high flexible ER, technological innovation has no significant mediating effect on the relationship between ER and business performance.
The above results further prove that the mediating effect of technological innovation is negatively adjusted by the ERF.
4.4. Discussion of Statistical Results
Based on the results of regression analysis, this study on the relationship between ER and business performance, which takes technological innovation as a mediator variable and ERF as a moderator variable, has the following major statistical results.
First, ER is negatively correlated with business performance, and technological innovation has a significant mediating effect on the relationship between them. The reasons are as follows: (1) ER make enterprises spend extra environmental protection such as pollution control, which increases the cost of enterprises, limits the investment of technological innovation, affects the market competitiveness of products, and thus leading to the lower business performance of enterprises. (2) ER will distract enterprise managers from coping with various environmental inspections and divert their attention from technological innovation, affecting enterprise management efficiency, which adversely affects enterprise business performance. (3) The constraint of ER will force some polluting enterprises to move to areas with weak ER [
51], but these areas often lack basic resources and necessary conditions for technological innovation, making it difficult for enterprises to improve their business performance through technological innovation.
Second, the mediating effect of technological innovation between ER and business performance is negatively adjusted by ERF. The main reasons for this are as follows: (1) The more flexible ER sets challenging goals for enterprises and provides sufficient time for technological innovation [
52]. Instead of being forced to follow strict ER, some enterprises with technological innovation capability are willing to increase investment in technological innovation to make them more competitive and improve their business performance. (2) With the increasing intensification of green consumerism, enterprises with a green image and environmental protection products have stronger market competitiveness [
53]. At this time, the more flexible ER provides more favorable conditions for enterprises to carry out environmental protection technology innovation. By increasing investment in technology innovation, enterprises can establish the image of green enterprises in the market with cleaner and more environmentally friendly technological processes and green products, while hedging the adverse impact of ER with “innovation compensation”. (3) The more flexible ER is attractive to foreign direct investment (FDI) [
51]. FDI provides financial support for technological innovation of enterprises, filling the technological innovation capital gap caused by ER, and enabling enterprises to improve business performance through technological innovation. (4) Under the overly flexible ER, there are some “gray areas” that are not conducive to the effective implementation of ER, which will give rise to a large number of “speculative behaviors”, “power rent-seeking” and so on. Therefore, enterprises cannot offset the compliance cost through “innovation compensation”, which will also weaken the mediating effect of technological innovation.