Linking Environmental Regulation and Financial Performance: The Mediating Role of Green Dynamic Capability and Sustainable Innovation

Xinpeng Xing,Lin Shen,Jianhua Wang,Tiansen Liu

doi:10.3390/su12031007

Xinpeng Xing, Lin Shen + Show 2 more

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https://doi.org/10.3390/su12031007

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Abstract

This study develops a multiple mediating model for exploring the link between environmental regulation and financial performance through green dynamic capability, sustainability exploration/exploitation innovation, based on the data from 355 Chinese manufacturing firms. Empirical results support a mediating role of green dynamic capability and sustainability exploration/exploitation in the link between environmental regulation and financial performance, respectively. What’s more, our findings indicate that environmental regulation can help improve financial performance via two multiple mediating paths, i.e., green dynamic capability and sustainability exploration innovation, as well as green dynamic capability and sustainability exploitation innovation. These key findings will help to understand how important green dynamic capability and sustainable innovation is when Chinese manufacturing firms establish a business-politics tie.

Highlights

Climate change and environmental pollution have become inevitable problems in the pursuit of economic growth [1,2]
We proposed in Hypotheses H1a and H1b that environmental regulation positively influences two types of sustainable innovation: Sustainability exploitation innovation and sustainability exploration innovation, respectively
To examine H1a and H1b, the results in Table 3 and Figure 2 indicate that the direct effects of environmental regulation on sustainability exploitation innovation and sustainability exploration innovation are different

Summary

Introduction

Climate change and environmental pollution have become inevitable problems in the pursuit of economic growth [1,2] In this context, sustainable development is viewed as a key way to mitigate the pressure caused by economic development and environmental protection, and requires the joint efforts from multi-stakeholders, including government, business organization, and public [3,4]. It is a key to identify the link among environmental regulation, technology innovation, and economic output, designing more paths for firms’ sustainable development. To reveal this link, quite a lot of literature has emerged with a typical research finding as the Porter Hypothesis [10].

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