Market Competition, Financialization, and Green Innovation: Evidence From China’s Manufacturing Industries

Abstract

Green innovation has become a critical measure to address the sustainable development challenges of manufacturing industries, and research has largely neglected the important role of managers as decision-makers within firms. Using a sample of China’s listed manufacturing firms from 2009 to 2019, this study explores the impact of market competition and financialization on corporate green innovation and examines the moderating effect of market competition. The main findings are as follows. First, intense market competition may inhibit corporate green innovation in the context of the Chinese market. Second, managers are willing to sacrifice firms’ long-term interests in exchange for profits in the short run. Third, market competition alleviates the negative association between financialization and corporate green innovation, indicating that the interactions between manufacturing firms may alter managers’ preferences for financial investment. In addition, our study explores heterogeneous impacts of market competition and financialization on corporate green innovation, and the empirical results are consistent with our findings in most cases. Our findings provide support for rational resource allocation in green innovation and can be used to guide manufacturing firms to achieve their goals of sustainable development.

CEO educational attainment, green innovation, and enterprise performance: Evidence from China’s heavy-polluting enterprises

“…Existing studies have revealed that green innovation within enterprises is influenced by both the external and internal environment. The external environment includes 1) national laws, regulations, and systems on environmental protection, which set the conditions for them to enter the market and how to participate in the market, as well as the costs they will bear after violating these conditions (Huang et al, 2021), 2) industry competition, which mainly shows the attraction of enterprises to production factors and production efficiency events (Guo et al, 2022), and 3) energy prices and policies, which will directly affect the market positioning and strategic planning of green innovation (Bloom et al, 2010;Melander, 2018). The internal environment is related to 1) the organizational structure and management practices, which impact green innovation through information flow, experience accumulation, flexibility, organizational efficiency, and logistics (Wang P. et al, 2022;Amore et al, 2019;Amore and Bennedsen, 2016), 2) corporate governance, which motivates green innovation of enterprises through equity structure, board governance, and operator incentives (Xue et al, 2022;Liu et al, 2021), and 3) the company's strategy and accounting behavior, which focus on the internal systems of enterprises and industrial alliances (Rui and Lu, 2021).…”

Can Green Mergers and Acquisitions Curb the Financialization of Heavily Polluting Enterprises? Evidence From China

“…Unlike Li et al [20] who suggested that risktaking and research and development (R&D) investment play a mediating role between corporate financialization and green technology innovation, Huang et al [21] argued that it should be financial leverage. In conclusion, almost all studies support that corporate financialization has a crowding-out effect on green technology innovation [22]. While Sui & Yao [23] believed that green technology innovation can also inhibit corporate financialization.…”

Do local governments’ energy-saving target constraints inhibit financialization? Evidence from nonfinancial listed firms in China

“…In addition, pressures to create shareholder value [10], technological changes [11], trust structures [12], growth in the cash holdings of nonfinancial firms [13], and government subsidies affect firms' financial asset allocation [14]. Accordingly, the existing studies on the governance effects of financialization mainly focus on social trust and corporate social responsibility [15], stock market liberalization [16], the aspects of shareholder pay-outs [17], and market competition [18].…”