Motivated to Fight Climate Change? How TMT Regulatory Focus Shapes Green Innovation in Family Firms

Abstract

Facing trends of environmental regulations and environmental consciousness, firms need to engage in green innovation. Particularly important for family firms, green innovation helps firms to achieve sustainable competitive advantage, fostering long-term firm survival. Yet, we still lack theoretical evidence on how motivational characteristics of the top management team (TMT) (i.e., regulatory focus) relate to green innovation. Drawing on upper echelons and regulatory focus theory, we examine the relationship between TMT regulatory focus and green innovation. We further posit that family involvement and technological turbulence moderate this relationship. Analyzing a longitudinal panel dataset with 910 firm-year observations of 116 S&P 500 family firms between 2005 and 2018, we find that TMT promotion and prevention focus are positively associated with green innovation. Family involvement positively moderates the relationship between TMT promotion focus and green innovation but does not moderate the relationship between TMT prevention focus and green innovation. In addition, technological turbulence positively (negatively) moderates the relationship between TMT promotion (prevention) focus and green innovation. This study expands research on upper echelons and regulatory focus theory by showing that psychological characteristics of TMTs (i.e., regulatory focus) determine firm-level outcomes (i.e., green innovation) in family firms, linking regulatory focus theory to the TMT.