Does state participation promote or damage green innovation?

Abstract

Although the literature advocates that the state plays a significant role in affecting firms' behaviour in emerging economies, whether state participation promotes or impedes firms' innovation decisions requires further scholarly attention. In this study, we develop a framework in which we examine how and under what conditions state participation affects firms' green innovation. Results from publicly listed firms in China show an inverted U‐shaped relationship between state participation and green innovation, so that state participation in the form of minority ownership is most effective for firms seeking to conduct green innovation. This curvilinear relationship is negatively moderated by firm age and firm size, such that the inverted U‐shape flattens when a firm is older and larger. The relationship is positively moderated by subnational institutional development such that the inverted U‐shape steepens when institutional development is higher. These findings provide useful implications for resource dependence theory in explaining whether state participation serves as a facilitator of or a burden on firms' green innovation.