Customer contagion effects of voluntary environmental regulation: A supplier green innovation perspective

Abstract

Prior studies primarily focused on internal green innovation and environmental performance concerning voluntary environmental regulations. Little attention has been given to the impact of partner-imposed regulations, such as those by customers, on green innovation in supplier firms. This research explores the influence of customer-driven voluntary environmental regulation on supplier green innovation and its mechanisms. The findings indicate that customer-driven voluntary environmental regulation leads to a positive contagion effect, significantly fostering supplier green innovation. Robustness is maintained through tests, including trend analysis, placebo tests, propensity score matching (PSM), and controls for spillover mechanisms and external influences. Demand feedback and knowledge spillover are identified as mediating mechanisms. Additionally, equity linkage and state ownership in suppliers facilitate customer-driven voluntary environmental regulation, further promoting green innovation. This study advances understanding in the context of supply chain green innovation.