Innovation in shouldering green responsibility: ESG performance and green technology innovation

Environmental, social, and governance (ESG) management is important to drive continuous technological progress and achieve high-quality growth for enterprises. The study examines how corporate ESG performance influences green technology innovation (GTI) using data from 2011 to 2020 Chinese A-share listed industrial corporations. Improving corporate ESG performance significantly promotes GTI; these findings remain stable after the treatment of endogenous problems and various robust checks. Corporate life cycle stage, industry features, and patent types have different impacts on the benchmark results. Three channels, including reducing external debt financing costs, mitigating managerial myopia, and optimizing supply chain financing, are the main mechanisms. The moderating effect shows that the external attention augments the positive effect of enterprise ESG performance on GTI, while the top 10 shareholder ownership ratio diminishes the influence. Further studies reveal that corporate ESG performance negatively affects the quality of GTI, while it continuously promotes corporate productivity and operating performance. Better ESG performance helps generate a greater “knowledge spillover” effect among firms. We add to the existing research on linking enterprise ESG performance and GTI, and additionally give information for businesses in developing countries on how to approach the Sustainable Development Goals (SDGs).

Link: https://www.sciencedirect.com/science/article/abs/pii/S0140988325000209