Green technology innovation in Chinese construction firms under the low-carbon city pilot policy

The low-carbon city pilot policy (LCCP) is a pivotal initiative for advancing green technology innovation in China. However, existing research on the impact of low-carbon city pilot policies on green innovation in construction enterprises remains relatively limited, thereby hindering sustainable and high-quality development of the industry. Therefore, this empirical study addresses this gap by analyzing 1921 annual observations from 113 listed construction companies in China (2005–2021) using a multi-period difference-in-differences (DID) model. The results reveal that LCCP implementation significantly enhances the green innovation capabilities of construction firms, with the policy effect following an inverted U-shaped trajectory—initially rising before gradually declining. Mechanism analysis indicates that the LCCP policy accelerates green innovation by promoting digital transformation and alleviating financing constraints. However, market power weakens the policy's impact on green technological innovation in the construction sector. Heterogeneity tests further reveal that the policy's effects are more pronounced for non-state-owned enterprises (non-SOEs), regions with stricter environmental regulations, large-scale enterprises, and eastern urban areas. The study contributes to the existing literature by providing a comprehensive evaluation of the impact of LCCP. The study also extends the application of Porter’s hypothesis to the construction sector while offering practical pathways and policy recommendations for facilitating the green transformation of China’s construction industry and achieving the dual-carbon objectives.