The influence mechanism of ESG performance on corporate green innovation: Evidence based on Chinese A-share listed companies

Xiaoguang Zhou, Huimin Liu

Article ID: 6048
Vol 6, Issue 2, 2023

VIEWS - 112 (Abstract) 48 (PDF)

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

Full Text:

PDF


References


1. Cai W, Zhou X. On the drivers of eco-innovation: empirical evidence from China. Journal of Cleaner Production. 2014; 79: 239-248. doi: 10.1016/j.jclepro.2014.05.035

2. Rennings K. Redefining innovation-eco-innovation research and the contribution from ecological economics. Ecological Economics. 2000; 32(2): 319-332.

3. Wan G, Dawod AY. ESG Rating and Northbound Capital Shareholding Preferences: Evidence from China. Sustainability. 2022; 14(15): 9152. doi: 10.3390/su14159152

4. Flammer C, Bansal P. Does a long‐term orientation create value? Evidence from a regression discontinuity. Strategic Management Journal. 2017; 38(9): 1827-1847. doi: 10.1002/smj.2629

5. Wan G, Dawod AY, Chanaim S, et al. Hotspots and trends of environmental, social and governance (ESG) research: a bibliometric analysis. Data Science and Management. 2023; 6(2): 65-75. doi: 10.1016/j.dsm.2023.03.001

6. Ouyang X, Li Q, Du K. How does environmental regulation promote technological innovations in the industrial sector? Evidence from Chinese provincial panel data. Energy Policy. 2020; 139: 111310. doi: 10.1016/j.enpol.2020.111310

7. Beise M, Rennings K. Lead markets and regulation: a framework for analyzing the international diffusion of environmental innovations. Ecological Economics. 2005; 52(1): 5-17. doi: 10.1016/j.ecolecon.2004.06.007

8. Blättel‐Mink B. Innovation towards sustainable economy‐the integration of economy and ecology in companies. Sustainable development. 1998; 6(2): 49-58. doi: 10.1002/(SICI)1099-1719(199808)6:2<49::AID-SD84>3.0.CO;2-I

9. Tan Y, Zhu Z. The effect of ESG rating events on corporate green innovation in China: The mediating role of financial constraints and managers’ environmental awareness. Technology in Society. 2022; 68: 101906. doi: 10.1016/j.techsoc.2022.101906

10. Wang J, Ma M, Dong T, et al. Do ESG ratings promote corporate green innovation? A quasi-natural experiment based on SynTao Green Finance’s ESG ratings. International Review of Financial Analysis. 2023; 87: 102623. doi: 10.1016/j.irfa.2023.102623

11. Broadstock DC, Matousek R, Meyer M, et al. Does corporate social responsibility impact firms’ innovation capacity? The indirect link between environmental & social governance implementation and innovation performance. Journal of Business Research. 2020; 119: 99-110. doi: 10.1016/j.jbusres.2019.07.014

12. Hao J, He F. Corporate social responsibility (CSR) performance and green innovation: Evidence from China. Finance Research Letters. 2022; 48: 102889. doi: 10.1016/j.frl.2022.102889

13. Amore MD, Bennedsen M. Corporate governance and green innovation. Journal of Environmental Economics and Management. 2016; 75: 54-72. doi: 10.1016/j.jeem.2015.11.003

14. Fabrizi A, Guarini G, Meliciani V. Green patents, regulatory policies and research network policies. Research Policy. 2018; 47(6): 1018-1031. doi: 10.1016/j.respol.2018.03.005

15. Leyva-de la Hiz DI, Ferron-Vilchez V, Aragon-Correa JA. Do Firms’ Slack Resources Influence the Relationship Between Focused Environmental Innovations and Financial Performance? More is Not Always Better. Journal of Business Ethics. 2018; 159(4): 1215-1227. doi: 10.1007/s10551-017-3772-3

16. Shen C, Li S, Wang X, et al. The effect of environmental policy tools on regional green innovation: Evidence from China. Journal of Cleaner Production. 2020; 254: 120122. doi: 10.1016/j.jclepro.2020.120122

17. Xiang X, Liu C, Yang M. Who is financing corporate green innovation? International Review of Economics & Finance. 2022; 78: 321-337. doi: 10.1016/j.iref.2021.12.011

18. Hu G, Wang X, Wang Y. Can the green credit policy stimulate green innovation in heavily polluting enterprises? Evidence from a quasi-natural experiment in China. Energy Economics. 2021; 98: 105134. doi: 10.1016/j.eneco.2021.105134

19. Zhang P, Zhou D, Guo J. Policy complementary or policy crowding-out? Effects of cross-instrumental policy mix on green innovation in China. Technological Forecasting and Social Change. 2023; 192: 122530. doi: 10.1016/j.techfore.2023.122530

20. Xiong H, Payne D, Kinsella S. Peer effects in the diffusion of innovations: Theory and simulation. Journal of Behavioral and Experimental Economics. 2016; 63: 1-13. doi: 10.1016/j.socec.2016.04.017

21. Fan R, Wang Y, Chen F, et al. How do government policies affect the diffusion of green innovation among peer enterprises?—An evolutionary-game model in complex networks. Journal of Cleaner Production. 2022; 364: 132711. doi: 10.1016/j.jclepro.2022.132711

22. Cheng B, Ioannou I, Serafeim G. Corporate social responsibility and access to finance. Strategic Management Journal. 2013; 35(1): 1-23. doi: 10.1002/smj.2131

23. Zhou X, Tang X. Does financing constraints impact the Chinese companies’ pollutants emissions? Evidence from a sample selection bias corrected model based on Chinese company-level panel data. Environmental Science and Pollution Research. 2022; 29(29): 44119-44134. doi: 10.1007/s11356-022-18907-7

24. Ahmed SU, Ahmed SP, Hasan I. Why banks should consider ESG risk factors in bank lending? Banks & Bank Systems. 2018; 3(13): 71-80.

25. Zhou X, Tang X, Wu S. The impact of national culture on IPO underpricing and its influence mechanism: A cross-border empirical research. Finance Research Letters. 2022; 47: 102543. doi: 10.1016/j.frl.2021.102543

26. Yan Y, Xu X, Lai J. Does Confucian culture influence corporate R&D investment? Evidence from Chinese private firms. Finance Research Letters. 2021; 40: 101719. doi: 10.1016/j.frl.2020.101719

27. Berrone P, Fosfuri A, Gelabert L, et al. Necessity as the mother of ‘green’ inventions: Institutional pressures and environmental innovations. Strategic Management Journal. 2013; 34(8): 891-909. doi: 10.1002/smj.2041

28. Lian G, Xu A, Zhu Y. Substantive green innovation or symbolic green innovation? The impact of ER on enterprise green innovation based on the dual moderating effects. Journal of Innovation & Knowledge. 2022; 7(3): 100203. doi: 10.1016/j.jik.2022.100203

29. Jiang L, Bai Y. Strategic or substantive innovation?—The impact of institutional investors’ site visits on green innovation evidence from China. Technology in Society. 2022; 68: 101904. doi: 10.1016/j.techsoc.2022.101904

30. Li J, Lian G, Xu A. How do ESG affect the spillover of green innovation among peer firms? Mechanism discussion and performance study. Journal of Business Research. 2023; 158: 113648. doi: 10.1016/j.jbusres.2023.113648

31. Li J, Lu Y, Song H, et al. Long-term impact of trade liberalization on human capital formation. Journal of Comparative Economics. 2019; 47(4): 946-961. doi: 10.1016/j.jce.2019.08.002

32. Hadlock CJ, Pierce JR. New Evidence on Measuring Financial Constraints: Moving Beyond the KZ Index. Review of Financial Studies. 2010; 23(5): 1909-1940. doi: 10.1093/rfs/hhq009

33. Chen Y, Lin P, Tsao HT, et al. How does Confucian culture affect technological innovation? Evidence from family enterprises in China. PLOS ONE. 2022; 17(6): e0269220. doi: 10.1371/journal.pone.0269220




DOI: https://doi.org/10.24294/fsj.v6i2.6048

Refbacks

  • There are currently no refbacks.


Copyright (c) 2023 Xiaoguang Zhou, Huimin Liu

License URL: https://creativecommons.org/licenses/by-nc/4.0/