What kind of enterprises will survive and what kind of enterprises will be eliminated is a direct reflection of the market’s selective function. With the gradual increase of environmental regulation and the gradual stringency of emission standards, a large number of polluters’ economic performance and survival state will be inevitably affected. If effective measures are not taken, the market’s selective function will deteriorate the survival state of high polluters and even eliminate them from the market under the pressure of rising clean production costs. A key point in the real economy is whether high polluters will be necessarily eliminated earlier than other enterprises? If not, what is the survival pathway for them? As the Potter hypothesis, it is the result of improving the production efficiency under the pressure of rising clean production costs, or there are other unknown reasons behind it. It is of great significance to give a clear answer to the above questions. In order to overcome the impact of pollution externalities, the government will make external pressure on polluters through various forms of environmental regulation. One of the possible ways is to increase their market competitiveness by improving production efficiency. If this logic is established, it will be consistent to the policy objectives of better playing the role of the market’s invisible hand through the government’s visible hand. On the contrary, if the government gives some selective policy support to polluters, such as government subsidies, the improvement of polluters’ survival state is at the cost of distorting the market resource allocation function. Unfortunately, few studies have paid attention to it, and have been able to give a convincing explanation to their survival pathway. This paper investigates the survival state and moderating effect of China’s microcosmic polluters by duration analysis, and tries to spread in the following field: (1) examining the relationship between the pollutant emission intensity and survival state of enterprises in order to judge whether highest-polluters are the first one to be withdrawn from the market; (2) investigating whether polluters can increase their survival probability by efficiency improvement, and evaluating whether their survival is contrary to the law of the market’s selective function; (3) making a classification research according to light-heavy industries. This paper obtains the following findings: (1) Contrary to the expectation, higher polluters have a relatively longer survival time, and the endogenous treatment, continuous inspection and other robustness tests can verify the above conclusions. (2) Polluters’ survival pathway more depends on the direct role of government subsidies. Meanwhile, the Potter hypothesis, which fits the market’s selective function, does not appear in the sample period. (3) Capital’s output elasticity plays a role of amplifier to strengthen the subsidy dependence of heavy industry. The survival state and survival pathway of polluters is contrary to the function of the market’s selection, which is damage to China’s economic restructuring. Therefore, while increasing the intensity of environmental regulation, the government should cautiously use subsidy policies and force enterprises to achieve green development through efficiency improvement.
Polluters’ Survival Pathway: An Investigation and Rethink on “Too Polluted to Fail”
Journal of Finance and Economics Vol. 45, Issue 07, pp. 84 - 96,封三 (2019) DOI:10.16538/j.cnki.jfe.2019.07.007
 Bao Q, Ye N H, Wang Y L. Foreign competition, industrial linkage and domestic firm’s survival in China[J]. Economic Research Journal, 2015, (7): 102-115. (In Chinese)
 Cao P, Wang G J. Selective industrial policy, corporate innovation and innovation survival time: Empirical evidence from Chinese industrial enterprise[J]. Industrial Economics Research, 2018, (4): 26-39. (In Chinese)
 Deng Z L, Chen Y. The impact of foreign direct investment on the survival of state-owned enterprises: Based on the research of enterprise heterogeneity[J]. The Journal of World Economy, 2013, (12): 53-69. (In Chinese)
 Fu L P, Li Y H. Government subsidies, innovation ability and enterprise survival time[J]. Studies in Science of Science, 2015, (10): 1495-1503. (In Chinese)
 Guo F, Shi Q L. Official turnover, collusion deterrent and temporary improvement of air quality[J]. Economic Research Journal, 2017, (7): 155-168. (In Chinese)
 He W T, Xiao X Z. Entering volatility, industrial concussion and enterprise survival: Research on dynamic evolution of China’s photovoltaic industry[J]. Management World, 2018, (1): 114-126. (In Chinese)
 Jiang L D. Will the agglomeration reduce the risk of firm failure? Firm-level evidence from China[J]. Industrial Economics Research, 2016, (5): 1-12. (In Chinese)
 Kang N, Chen L. Subsidy, competition and enterprise survival with the implementation of industry policy[J]. Modern Economic Science, 2018, (2): 85-93. (In Chinese)
 Li P, Li S Y, Yang J. Misallocation，firm survival and TFP[J]. Nankai Economic Studies, 2018, (5): 155-175. (In Chinese)
 Li S Y, Li P, Xu J Y. Imports and firm survival: Empirical analysis based on Chinese manufacturing enterprises[J]. Nankai Economic Studies, 2018, (1): 140-157. (In Chinese)
 Liang P H, Gao N. Personnel change, legal environment and local environmental pollution[J]. Management World, 2014, (6): 65-78. (In Chinese)
 Liu H Y, Xie J Z. Do emission trading and subsidies for clean-technology R&D improve the level of clean-technology innovation? Evidence from the pilot provinces of industrial SO2 emission trading[J]. Journal of Shanghai University of Finance and Economics, 2016, (5): 79-90. (In Chinese)
 Long S, Hu J. On environmental pollution from the perspective of government-enterprise collusion: Theoretical and empirical analysis[J]. Journal of Finance and Economics, 2014, (10): 131-144. (In Chinese)
 Lu Y D, Yu J, Liu H Y. Study on the cardiotonic effect of export behavior on firm survival: Empirical analysis from China enterprise panel data in the year of 1999-2008[J]. Economic Theory and Business Management, 2013, (8): 60-71. (In Chinese)
 Tan Z, Wang C Z, Li D Y. The quality of the system of the destination country and the survival of the enterprise's exports: Evidence from China[J]. The Journal of Quantitative & Technical Economics, 2014, (8): 87-101. (In Chinese)
 Wang W J, Liu X X. Why do zombie firms survive for a long time?[J]. China Industrial Economics, 2018, (10): 61-79. (In Chinese)
 Xiao X Z, He W T, Guo X D. Capacity accumulation, Expansion behavior and enterprise survival time: Based on the research of enterprise survival based on China’s strategic emerging industries[J]. Management World, 2014, (2): 77-89. (In Chinese)
 Xie Q L, Luo S J, Zhang T F. Productivity growth and convergence across China’s industrial economy[J]. China Economic Quarterly, 2008, (3): 809-826. (In Chinese)
 Yu M G, Hui Y F, Pan H B. Political connections, rent seeking and the fiscal subsidy efficiency of local governments[J]. Economic Research Journal, 2010, (3): 65-77. (In Chinese)
 Zhang H, Peng B Y. Innovative behavior and firm survival: Do innovative environment and employee education matter[J]. Industrial Economics Research, 2017, (4): 30-40. (In Chinese)
 Zhang Y B, Kou P, Zhang D N, et al. Research on the collusion between government and enterprise in the process of enterprise pollution reduction[J]. Operations Research and Management Science, 2018, (11): 184-192. (In Chinese)
 Zhao L G, Zhong B, Wang X Y. Study on effect of industrial pollution treatment investment on regional employment[J]. China Industrial Economics, 2014, (5): 70-82. (In Chinese)
 Zheng D Y, Pi J C. Capital-biased economic growth in China: 1998-2007[J]. The Journal of World Economy, 2017, (5): 24-48. (In Chinese)
 Carboni O A. R&D subsidies and private R&D expenditures: Evidence from Italian manufacturing data[J]. International Review of Applied Economics, 2011, 25(4): 419-439.
 Chen M Y. Survival duration of plants: Evidence from the us petroleum refining industry[J]. International Journal of Industrial Organization, 2002, 20(4): 517-555.
 Cox D R, Oakes D. Analysis of survival data[M]. London, New York: Chapman and Hall, 1984.
 Fraussen B. The visible hand of the state: On the organizational development of interest groups[J]. Public Administration, 2014, 92(2): 406-421.
 Fuentes R, Dresdner J. Survival of micro-enterprises: Does public seed financing work?[J]. Applied Economics Letters, 2013, 20(8): 754-757.
 Ghanem D, Zhang J J. Effortless perfection: Do Chinese cities manipulate air pollution data?[J]. Journal of Environmental Economics and Management, 2014, 68(2): 203-225.
 Hansen C, Kozbur D. Instrumental variables estimation with many weak instruments using regularized JIVE[J]. Journal of Econometrics, 2014, 182(2): 290-308.
 Holmes P, Hunt A, Stone I. An analysis of new firm survival using a hazard function[J]. Applied Economics, 2010, 42(2): 185-195.
 Howell A, He C F, Yang R D, et al. Agglomeration, (un)-related variety and new firm survival in China: Do local subsidies matter?[J]. Papers in Regional Science, 2018, 97(3): 485-500.
 Kalbfleisch J D, Prentice R. L. Marginal likelihoods based on Cox’s regression and life model[J]. Biometrika, 1973, 60(2): 267-278.
 Kheder S B, Zugravu N. Environmental regulation and French firms location abroad: An economic geography model in an international comparative study[J]. Ecological Economics, 2012, 77: 48-61.
 Koch P T, Koch B, Menon T, et al. Cultural friction in leadership beliefs and foreign-invested enterprise survival[J]. Journal of International Business Studies, 2016, 47(4): 453-470.
 Lanoie P, Laurent-Lucchetti J, Johnstone N, et al. Environmental policy, innovation and performance: New insights on the porter hypothesis[J]. Journal of Economics & Management Strategy, 2011, 20(3): 803-842.
 Lanoie P, Patry M, Lajeunesse R. Environmental regulation and productivity: Testing the porter hypothesis[J]. Journal of Productivity Analysis, 2008, 30(2): 121-128.
 Li X, Ramsden M. Founder expertise, strategic choices, formation, and survival of high-tech SMEs in China: A resource-substitution approach[J]. Journal of Small Business Management, 2016, 54(3): 892-911.
 Lyles M A, Saxton T, Watson K. Venture survival in a transitional economy[J]. Journal of Management, 2004, 30(3): 351-375.
 Mao Q L, Xu J Y. The more subsidies, the longer survival? Evidence from Chinese manufacturing firms[J]. Review of Development Economics, 2018, 22(2): 685-705.
 Michl T. Biased technical change and the aggregate production function[J]. International Review of Applied Economics, 1999, 13(2): 193-206.
 Papyrina V. When, how, and with what success? The joint effect of entry timing and entry mode on survival of Japanese subsidiaries in China[J]. Journal of International Marketing, 2007, 15(3): 73-95.
 Porter M E, van der Linde C. Toward a new conception of the environment-competitiveness relationship[J]. Journal of Economic Perspectives, 1995, 9(4): 97-118.
 Smith D, Feldman M, Anderson G. The longer term effects of federal subsidies on firm survival: Evidence from the advanced technology program[J]. The Journal of Technology Transfer, 2018, 43(3): 593-614.
 Smulders S, Di Maria C. The cost of environmental policy under induced technical change[R]. CESifo Working Paper 3886, 2012.
 Wu J, Deng Y H, Huang J, et al. Incentives and outcomes: China’s environmental policy[J]. Capitalism and Society, 2014, 9(1): 1-25.
Cite this article
Xu Zhiwei, Li Ruihan. Polluters’ Survival Pathway: An Investigation and Rethink on “Too Polluted to Fail”[J]. Journal of Finance and Economics, 2019, 45(7): 84-96.
Previous: Life Expectancy and Retirement Age