The Impact of Corporate Innovation on Environmental Performance: The Moderating Effect of Financing Constraints and Government Subsidies

Abstract

As an essential means of reducing environmental stress, corporate innovation faces financial pressure and financial risk; so, whether corporate innovation contributes to environmental performance is related to the firm’s external capital environment (financing constraints and government subsidies). This study explores the relationships between corporate innovation, environmental performance, and the external capital environment using 1127 observations of China’s energy-intensive public companies from 2012 to 2020. The outcomes indicate that corporate innovation has a significant positive impact on environmental performance. Financing constraints provide a negative moderation of the relationship between corporate innovation and environmental performance, while government subsidies provide a positive moderation. That is, firms with high financing constraints are less likely to increase their environmental performance by innovation, while firms with high government subsidies enhance the positive influence of corporate innovation on environmental performance. The moderating effect of financing constraints varies at different levels of government subsidies, i.e., high levels of government subsidies diminish the negative moderating effect of the financing constraints between corporate innovation and environmental performance. This study’s conclusions provide a reference for the government in formulating corporate innovation subsidies and financial policies and a basis for the decision-making behaviors of enterprises regarding environmental protection and economic development.