Service Inputs, Cleaner Production? Evidence from Chinese Manufacturing Exporters
Description
Reconciling economic growth with environmental sustainability remains challenging for developing economies, particularly in export-oriented manufacturing. Input servitization offers a potential pathway, yet its environmental implications at the firm level remain underexplored. This study examines how manufacturing input servitization affects exporting firms’ environmental performance. We develop a theoretical framework integrating servitization decisions, pollution emissions, and firm heterogeneity. Combining Chinese firm-level production data, customs trade data, and input–output tables for 2000–2014, we measure input servitization among manufacturing exporters, including non-listed firms. Three main findings emerge. First, input servitization significantly reduces exporters’ pollution intensity, with results robust to sensitivity checks. Second, mechanism analyses indicate that this effect operates through in-house R&D innovation and imported input expansion. Third, the environmental effects vary by service origin and financing constraints: foreign service inputs are associated with lower pollution intensity, whereas domestic service inputs are associated with higher pollution intensity; the pollution-reducing effect is stronger among firms facing fewer financing constraints. These findings provide micro-level evidence on the environmental implications of input servitization and inform policies supporting green manufacturing transformation in developing economies.