Can Green Public Procurement Drive Corporate Breakthrough Green Innovation? Evidence From Green Patent Textual Analysis

Abstract

This study examines the effect of green public procurement (GPP) on corporate breakthrough green innovation. We construct a novel measure of breakthrough innovation by applying advanced natural language processing models (i.e., SBERT and PatentSBERTa) to the textual similarity of green patent networks. Using a comprehensive panel of Chinese listed firms from 2015 to 2023, we find that GPP significantly catalyses breakthrough green innovation, with the magnitude of the effect increasing with procurement intensity. We identify two primary mechanisms: an external financing channel, where GPP alleviates financial constraints via credit generating effect, and an internal green governance channel, where government demand improves corporate governance through green demand effect. Cross‐sectional tests show the effect is more pronounced in firms receiving higher media attention and in regions with stronger intellectual property rights and stricter environmental regulation. Furthermore, we document significant positive spillovers along both industrial and supply chains. Our results are robust to local projection models, propensity score matching, instrumental variable estimation, omitted variable tests, and double machine learning method. Collectively, these findings highlight the pivotal role of demand‐side policy tools in shaping high‐quality corporate green innovation.