Abstract: This article provides new evidence on the role of market-based regulations and command-and-control regulations in relation to environmental innovations and economical and environmental performance of the firms in China. While policymakers have often merged the market-based approaches onto the non-market based regulations, it is sensible and essential to consider the interaction of the two types of regulations and its effects on the environmental technological innovation and firm performance. Using a unique firm survey data this article studies the effects of the two kinds of environmental regulations on firm’s environmental technological innovation and the performance of the firm and their interaction effects. Unlike the previous studies that are typically conducted at the industry level, I would like to take firm heterogeneity into account, and thereby reduce the common problem of omitted variable bias in this analysis. I empirically test the strong and significant effects on environmental technological innovation and firms’ economic and environmental performances from regulations and their interactive effects and the mediation effects of environmental technological innovation between regulations and the performances of the firms.

Key words: Firms&rsquo, performance