Mapping green innovation with machine learning: Evidence from China

Abstract

Achieving green innovation to eliminate the environmental impact of economic activities has been an important task for firms across industries. This study uses the resource-based view (RBV) and upper echelons theory (UET) to develop a green innovation determinants model and explore how firm characteristics, chief executive officer (CEO) characteristics, environmental actions, environmental disclosures, and industry characteristics influence corporate green innovation. Using a large-scale dataset of Chinese companies from 2010 to 2019 to identify the determinants of green innovation through machine learning algorithms, our results suggest that the extreme gradient boosting (XGBoost) method is the best model for predicting green innovation. After that, we visualized the effects and importance of the various feature variables through the best prediction model. Our results indicate that the environmental, social, and governance (ESG) rating is the most crucial determinant for green innovation, followed by internationalization, CEO pay, firm sales, industry size, research and development (R&D) intensity, and CEO education. Overall, our findings contribute to a broader understanding of the drivers of green innovation and offer critical implications for managers and policymakers to improve sustainable development.