This research challenges the traditional wisdom that stringent environmental regulation weakens a firm's competitiveness via lower profit and also decreases social welfare. We employ theoretical and empirical analyses to inject new insight into the Porter hypothesis. Our research result supports the Porter hypothesis that strict environmental regulation (i.e., a high pollution tax rate in this study) improves a firm's competitiveness via seeking new technology licensing. We further supplement that the pollution tax rate may bring a win-win result in the economy and environment by upgrading a firm's competitiveness, raising its profit, lowering environmental damage, and improving social welfare.