Abstract: The market-guided green transformation of industrial enterprises is considered a crucial approach to achieving sustainable economic development. Based on China’s green public procurement policy, this paper examines the role of government demands in guiding the green innovations of enterprises by using a multi-period double-difference approach. The result reveals that the government public procurement is the important source of demands in the environment protection products markets, and that the green procurement policy has effectively stimulated the development of green innovations in Chinese industrial enterprises. In this process, the increase in product market competition and the reduction of green R&D risks are the key mechanisms, and the demand pull effect is mainly reflected in the sample of enterprises sensitive to market competition and innovation risks. As an environmental policy focused on demand, the stronger the government’s purchasing power, the clearer the demand for green technology, and the shorter the distance to the final demand, the stronger the guiding role of the green procurement in green innovations. Further study reveals that although the effectiveness of the green procurement policies is significantly better than the similar environmental regulations, which can promote the overall green transformation of the industry, it mainly stimulates the diffusion of environmental technologies rather than breakthroughs. The above findings reveal the incentivizing role and the pathway of government green public procurement on corporate green innovations, indicating that the driving effect of government demand on market demand is an important reason why green procurement has become a powerful tool to stimulate innovations.

Key words: green innovation, government demand, green public procurement, industrial greening