Abstract
Green innovation helps companies achieve high-quality sustainable development, and environmental, social responsibility and corporate governance (ESG) performance impacts enterprises’ green innovation capability. Taking the data from 2011 to 2021 of Chinese A-share listed companies as the research sample, this paper empirically tests the impact of corporate ESG performance on green innovation and explores the impact mechanism. Measuring firms’ ESG performance through ESG score given by a third-party rating agency, this paper finds that better ESG performance enhances firms’ green innovation capability. Based on the double externality of green innovation, we find that better ESG performance of enterprises can enhance their green innovation capability by incentivizing firms in the same industry to innovate, strengthening external supervision, and alleviating financing constraints. As an important informal system in China, Confucianism has a certain inhibitory effect on firms’ green innovation capability. This paper provides a decision-making reference for the effectiveness of ESG in the Chinese market and corporate green sustainable development by investigating the impact mechanism of ESG performance on corporate green innovation capability.
Keywords
green innovation; ESG performance; double externalities; financing constraint; Confucianism
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