Green Innovation, Managerial Concern and Firm Performance: An Empirical Study

Abstract

Extant literature, while often suggesting a positive link between green innovation and firm performance, is inconclusive. Moreover, the possibly moderating role of management has not been sufficiently considered. Using a unique dataset sampling 188 manufacturing firms in China, we examine how managerial concern (for green issues) moderates the relationship between green innovation and firm performance. We find that green process innovation and green product innovation both significantly (positively) predict firm performance, when not considering managerial concern for the environment. Once managerial concern is included, we observe that it compounds the positive effect of green process innovation on firm performance -but not product innovation, which no longer explains significant unique variance in firm performance. The findings hold various implications for future research and business policy.

Environmental policy, environmental performance, and financial distress in China: Do top management team characteristics matter?

“…Particularly, China's rapid economic growth is often seemed to be associated with a compromise on environmental policies, regulations, management, and performance in the past. Although in recent years, the Chinese state, regulatory bodies, and nongovernmental organizations have pressed these issues and are encouraging corporations to move from “dirty” energy and manufacturing practices to a “cleaner/greener” or environmental friendly economy, China still leads the world substantially when it comes to carbon emissions, for example (Dhakal, ; Tang et al, ). It is, therefore, important to examine how Chinese firms (a) respond to institutional‐oriented environmental guidelines; (b) pursue environmentally friendly activities; and (c) how they can be further motivated to engage in and adopt environmentally friendly policies.…”

“…Consequently, China's emergence as the biggest economy was accomplished by compromising on the environment and climate. For example, China remains the world's leading emitter of CO 2 along with having the world's 20 most polluted cities (Dhakal, ; Tang et al, ). In other words, the emergence of modern‐day China was achieved with a heavy price (i.e., a compromise on environmental condition).…”

“…This trend towards greener environment is also evident from RKS ratings, where the number of firms (who are being evaluated on their environmental and social performance) is increasing every year. Moreover, different environmental policies, rules, and protocols, for instance, (a) “Environmental Protection Law”; (b) “State Environmental Protection Administration”; (c) “Global Reporting Initiatives (GRI)” guidelines; and (d) “Paris Climate Agreement,” have been adopted and likely to act as stimulating levers in the effective implementation of environmental standards that can enhance (a) environmental performance and (b) corporate financial outcomes in China (Chang et al, ; Tang et al, ; Yang et al, ).…”

“…Consequently, a limited number of studies have been conducted in this area of business strategy and environmental research (Gross, ; Haque & Ntim, ; Price & Sun, ; Tang, Walsh, Lerner, Fitza, & Li, ). For instance, some studies have highlighted that environmental or social performance can (a) reduce financial risk and bad reputation (Minor & Morgan, ; Moser & Martin, ); (b) diminish stakeholders' negative decisions about the firm (Godfrey et al, ); and (c) mitigate potential bankruptcy or financial distress (Al‐Hadi, Chatterjee, Yaftian, Taylor, & Monzur, ; Gross, ).…”

“…Moreover, the two stock exchanges (Shanghai and Shenzhen) recommended to listed firms to follow the “Global Reporting Initiatives (GRI)” guidelines for environmental reporting and disclosure (Yang, Craig, & Farley, ). Further, China is a major signatory to the 2016 “Paris Climate Agreement” (Tang et al, ), with a clear commitment to meeting the targets set in the accord. However, despite these recent good environmental policies, regulations, and management from state, regulatory, and civil bodies to enhance environmental performance in the country, the environmental problems are still prevalent.…”