Abstract
Purpose: Institutional theory is a reasonable explanation for the motives of corporate social responsibility (CSR) behaviours (e.g. corporate green innovation). The existing literature defines institutional pressure as threats for legitimacy when firms operate within a country or a region; one area that has received little attention is the situation when a firm extends its operations across borders to pursue internationalisation. The study investigates the impact of outward foreign direct investment (OFDI) on green innovation at the firm level. Design/methodology/approach: The zero-inflated negative binomial regression models are estimated to analyse the data collected from 2065 manufacturing enterprises listed in China during 2007–2017 ( n = 14 129). Green innovation is measured by the number of green patents, according to the World Intellectual Property Organization (WIPO) International Patent Classification (IPC) Green Inventory. Findings/results: The findings show that OFDI is positively associated with green innovation for emerging market enterprises (EMEs). Furthermore, compared with investment in emerging economies, OFDI in developed economies has a stronger positive relationship with corporate green innovation. The positive effect of OFDI on corporate green innovation will be higher for EMEs located in sub-national regions (i.e., province of the home country) with lower levels of institutional development. Practical implications: Emerging market enterprises should overcome organisational inertia and compete in a broader market to enhance their awareness and ability of green innovation. Originality/value: This article contributes to the existing literature by exploring institutional pressure faced by EMEs when they operate overseas (e.g. OFDI) can play a significant role in influencing green innovation, and enriches our understanding of EMEs’ inclination towards CSR (e.g. green innovation) in the context of internationalisation.
Highlights
Green innovation involves a process, technology or management model that can reduce energy consumption, environmental pollution and enhances corporate social responsibility (CSR) performance, which, in turn, facilitates sustainable development (Aghion, Dechezleprêtre, Hémous, Martin, & Van Reenen, 2016)
We extend prior research (Shu et al, 2014; Wei, Shen, Zhou, & Li, 2015) that focus on the influence of outward foreign direct investment (OFDI), for Chinese emerging market enterprises (EMEs) by empirically demonstrating how OFDI can become beneficial to corporate green innovation
There is evidence to reveal that corporate green innovation under the pressures of institutions varies within a country or region (Aghion et al, 2016; Shu et al, 2014), one sphere that has got little attention is the internationalisation of EMEs when they operate across the diverse economic and cultural background
Summary
Green innovation involves a process, technology or management model that can reduce energy consumption, environmental pollution and enhances corporate social responsibility (CSR) performance, which, in turn, facilitates sustainable development (Aghion, Dechezleprêtre, Hémous, Martin, & Van Reenen, 2016). The existing literature defines institutional pressure as threats for legitimacy or some other kind of uncertainty when firms operate within a specific organisational fields (e.g. the home country or regions) (Christmann & Taylor, 2002; DiMaggio & Powell, 1983), but EMEs may be expected to face a variety of demands or standards associated with green innovation when they try to run overseas. These EMEs have to conform to different formal or informal institutional practices under isomorphic effects. Compared to the use of survey interviews (Galbreath, 2019), environmental investment (Stucki, 2019) and third-party rating scores (Kang, 2013; Luo, Wang, & Zhang, 2017), green patents at the firm level are more objective and reflect the willingness and ability of corporate innovation to pursue environmental protection
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