ORIGINAL RESEARCH
Does Environmental, Social, and Governance
Performance Affect Corporate Green Innovation?
Evidence from China
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1
School of Entrepreneurship, Wuhan University of Technology
2
Economics and Management School, Wuhan University
Submission date: 2024-02-15
Final revision date: 2024-02-28
Acceptance date: 2024-04-18
Online publication date: 2024-09-13
Corresponding author
Mei Li
Economics and Management School, Wuhan University, China
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ABSTRACT
With the increasing emphasis on sustainable development worldwide, the innovative behavior of
corporations is being gradually influenced by the changing times. Responsible innovation means that
companies will increase their focus on environmental, social, and governance factors (ESG) and base their
green innovation on this. It is worth further studying whether ESG advantages will enhance a corporation’s
green innovation. This article explores the impact of ESG advantages on corporate green innovation
and their mechanisms based on stakeholder theory and incentive theory. Using publicly manufacturing
corporations in China from 2003 to 2022 as samples, this study measures ESG through corporate
environmental certification and social responsibility reports, green innovation through Green invention
patents, financing constraints through financing costs, green investment behavior through environmental
investment, and validates the hypotheses using a multidimensional fixed effects model. Firstly, this
study finds that ESG advantages significantly promote corporate green innovation. Secondly, this study
finds that it exerts influence through the mechanisms of alleviating financing constraints and increasing
environmental protection investment. Finally, heterogeneity tests reveal that the impact of ESG advantages
on green innovation is more pronounced in technology-leading companies and state-owned corporations.
This study explains the pivotal role of responsible companies in achieving green technology leadership
and providing policy implications for promoting China’s economic transformation and upgrading, as well
as achieving high-quality development and demonstrating responsible great power globally. It also aims to
realize a community with a shared future for mankind, balancing the legitimate concerns of other countries
while pursuing its interests and promoting the common development of all countries.