Abstract
Corporate environmental investment has long been recognized as a non-market strategy that helps secure both economic and social benefits. However, we know much less about how environmental investment affects corporate innovation. We argue that investment in environmental protection is an important source of institutional legitimacy for firms to secure government resources, thus providing financial support for corporate innovation activities. Using a sample of Chinese industrial firms, we find that firms investing more in environmental protection can receive more government subsidies and then have better innovation performance. This study emphasizes the mechanism of government resources, which enriches our understanding of the effect of environmental investment on corporate innovation.
Highlights
The rapid development of Chinese industrial economy has brought new challenges to the environmental governance (Wang et al, 2018)
The main contribution of this study is that, in contrast to previous studies that emphasize the economic benefits of corporate environmental investment, this study focuses on its driving force on innovation, which contributes to understanding the role of firms in technological and social changes
In order to test the role of environmental protection investment and government subsidies on corporate innovation, this study used a stepwise test coefficient method to test the mediating role of government subsidies between environmental investment and corporate innovation performance with a bootstrap model to perform 500 cycles of calculation (Baron and Kenny, 1986)
Summary
The rapid development of Chinese industrial economy has brought new challenges to the environmental governance (Wang et al, 2018). In the face of severe environmental challenges, the Chinese government had gradually increased its attention to environmental protection and begun to guide firms to increase their investment in environmental protection. Faced with serious environmental problems, the Chinese government has shown an unprecedented attention, to the role of firms in pollution control. Faced with environmental regulatory pressure and legitimacy requirements, most firms will increase environmental protection investment or participate in environmental innovation activities (Berrone et al, 2013). Under the new situation that China’s economy is shifting from high-speed growth to high-quality growth, the Chinese government has placed innovation at the center of the national development and actively guided firms to participate in innovation activities. The government provides policy guidance for corporate innovation, and the resources it has are an important factor in supporting corporate innovation activities, such as special government subsidies for firms to promote technological innovations in specific governmentencouraged areas
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