The asymmetric impact of venture capital on green innovation: Testing the natural resource Kuznets curve hypothesis in OECD economies

As innovation intersects with environmental sustainability, venture capital has emerged as a pivotal catalyst for green technologies, fundamentally reshaping resource utilization patterns and economic growth trajectories. This study investigates the impact of venture capital (VC) investments on green innovation within the framework of the natural resource Kuznets curve (NRKC) across 28 OECD countries spanning 2007–2020. Our linear estimations reveal that a 1% increase in VC investments generates a 0.58% increase in green innovation. However, quantile regression analysis uncovers diminishing marginal returns across the innovation distribution, with VC elasticity declining from 0.77% at the 10th quantile to 0.49% at the 90th quantile. The NRKC phenomenon manifests as a U-shaped relationship, exhibiting its strongest effects at the middle quantiles (30th–70th) of the green innovation distribution. Notably, environmental policy stringency attenuates the positive VC-green innovation nexus, with this negative moderation effect primarily driven by market-based instruments, while technology support policies actually enhance the VC-green innovation relationship. Robustness analyses confirm that VC investments across all development stages—seed, early, and later—consistently promote green innovation, though the NRKC pattern disappears in seed-stage investments. Our findings remain robust across alternative green innovation proxies, addressing concerns about patent-based measurement limitations. Our results recommend that developed economies optimize their environmental policy portfolios by strengthening technology support mechanisms while carefully calibrating market-based instruments to avoid crowding out private venture capital, and prioritize early-stage VC funding frameworks to maximize green innovation outcomes in capital-abundant institutional contexts.