Institutional pressures as drivers of corporate green innovation: do provincial officials and CEOs matter?

Abstract

Findings from prior studies regarding the relationship between national institutional pressures and corporate green innovation have been mixed. To address this gap, we consider the moderating effects of public agents (provincial officials) and private agents (corporate CEOs) to investigate corporate green innovation in response to institutional pressures. Using the method of difference-in-difference, we examine the data from 722 publicly listed Chinese firms between 2007 and 2019, a period associated with the implementation of China's Twelfth Five-Year Plan which increase the emphasis on social indicators for national development. Our results firstly show that institutional pressures caused by Twelfth Five-Year Plan significantly facilitate polluting-firms' green innovation relative to clean-firms, and the effect is stronger when public agents are more concerned about promotion to the central government or private agents have greater concerns for legitimacy, meanwhile not producing an a real "incentive effect" on corporate green innovation, but a "crowding-out effect" on existing innovation. Furthermore, results also suggest institutional pressures mainly induced polluting-firms' strategic innovation behaviors, and the incentive effects of institutional pressures on polluting-firms' green innovation are different in terms of firms' ownership and size. Our results generate important theoretical and practical implications.