The Impact of Government Regulation on Green Innovation in Small and Medium-Sized Manufacturing Enterprises: Evidence from a Four-Party Evolutionary Game Model

Against the backdrop of the ongoing advancement of the “dual carbon” goals and the carbon emission trading system, green innovation in small and medium-sized manufacturing enterprises faces multiple practical constraints, including financing constraints, technological commercialization risk, and market recognition costs. To examine the mechanism through which government regulation affects firms’ green innovation behavior, this study develops a four-party evolutionary game model involving government, small and medium-sized manufacturing enterprises, consumers, and investment institutions, and analyzes the strategic interactions and dynamic evolution of these actors. The results show that regulatory intensity, consumer green preference, and financial support from investment institutions all exert significant effects on green innovation decisions in small and medium-sized manufacturing enterprises. Whether firms choose substantive green innovation depends primarily on such key factors as financing uncertainty, technological commercialization risk, the intensity of government penalties, and the level of policy incentives. Further stability analysis and numerical simulations indicate that stronger administrative penalties significantly increase the likelihood that firms adopt substantive green innovation and also promote green consumption among consumers. This effect becomes more pronounced when financing uncertainty declines. At the same time, stronger policy incentives for green investment enhance the willingness of investment institutions to participate in green projects, and this effect is further reinforced when technological commercialization risk is reduced. The findings suggest that green innovation in small and medium-sized manufacturing enterprises is characterized by strong multi-actor interdependence. Its evolutionary outcome is shaped not only by regulatory pressure, but also by green financial support, the conditions for technological commercialization, and market demand. Accordingly, sustained green innovation in small and medium-sized manufacturing enterprises requires coordinated efforts to improve regulatory arrangements, strengthen green finance support systems, reduce the cost of technological commercialization, and cultivate green consumer markets.