Abstract
ABSTRACT Green innovation is a key driver of sustainable competitive advantage and environmental protection, but requires significant long-term investment. Prior findings suggest that firms are passively pressured to invest in green innovation by their institutional environment. In this study, we combine green innovation with legitimacy theory to examine how environmental legitimacy affects firms’ green innovation. Using a dataset of Chinese publicly-listed firms from 2003 to 2015, we find that firms actively invest in green innovation to acquire both individual legitimacy from citizens and collective legitimacy from the government. We also find that the positive effects on green innovation are heightened when the firm is state owned and weakened when the firm is involved in a pollution-intensive industry.
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