Does corporate environmental responsibility engagement affect firm value? The mediating role of corporate innovation

This paper aims to construct a comprehensive corporate environmental responsibility (CER) engagement measurement to examine the relationship between CER engagement and firm value as well as explore the mediating effect of corporate innovation on this relationship based on a sample of 496 China's A‐share listed companies from 2008 to 2016. The results show that when firms start to adopt environmental regulations, CER would have a negative effect on firm value; however, at a specific level, CER would start to enhance firm value positively. In addition to this, corporate innovation plays a mediating role in the relationship between CER and firm value. Corporate innovation promotes firm value of firms with CER more than firms without CER. Overall, the findings of this paper are extremely relevant for the government, investors, and firm's managers and can be utilized for policy and investment decision making. Also, the findings encourage firms to enhance their sense of environmental responsibility in order to enhance their competitive advantages, enhance corporate innovation capabilities, and thus enhance firm value.     

Is environmental innovation conducive to corporate financing? The moderating role of advertising expenditures

Environmental innovation is an important way for firms to achieve sustainable development and acquire resources. Based on the stakeholder, resource dependence, and signal transmission theories, this study divided environmental innovation into substantive and strategic eco‐innovation and constructed a relationship model among environmental innovation, advertising expenditures, and corporate financing. Selecting 162 Chinese manufacturing listed companies from 2012 to 2017 as the research sample and adopting the multiple regression analysis method, the study found that substantive eco‐innovation had a positive effect on corporate financing, but strategic eco‐innovation had a significant negative effect on corporate financing. Further, advertising expenditures played a positive moderating role between substantive eco‐innovation, strategic eco‐innovation, and corporate financing. The robustness test further confirmed these results.     

Can interfirm trust improve firms' cooperation on environmental innovation? The moderating role of environmental hostility

Based on the logic of “trust‐behavior,” we examined the relationship between interfirm cognitive trust, emotional trust, and firms' cooperation on environmental innovation, as well as the moderating role of environmental hostility on the relationship between two dimensions of interfirm trust and cooperation on environmental innovation. Data for the study were collected from 216 firms in China. The results indicated that both interfirm cognitive trust and emotional trust were positively correlated to firms' cooperation on environmental innovation, and the effect of emotional trust on firms' cooperation on environmental innovation was negatively moderated by environmental hostility. Finally, the results were discussed and future directions put forward.     

What drives environmental innovation? A meta-analysis

To clarify the drivers of environmental innovation, this study selected 50 independent samples from 49 publications to investigate the effects of four major factors—policy, market, resource capacity, and organizational characteristics—on environmental innovation using a meta-analysis, as well as demonstrating the moderating role of cultural background and industrial diversity. The results show that both environmental regulations and government subsidies positively promote environmental innovation and that cultural background and industrial diversity do play moderating roles in how environmental regulations impact environmental innovation. Furthermore, customer demand is also shown to have a positive impact on environmental innovation and is moderated by industrial diversity. However, market concentration is not shown to significantly affect environmental innovation. The results also show that knowledge sources, technological capabilities, organization's performance, and environmental management systems positively influence environmental innovation. Additionally, cultural background plays a moderating role between an organization's performance and environmental innovation, and industrial diversity can moderate technological capability and environmental innovation. Finally, the size of an organization is shown to positively affect environmental innovation and is also moderated by cultural background.     

Can everyone benefit from innovation?

This paper investigates whether there is an allocation rule for which innovation never hurts anyone. Existing studies provide possibility characterizations together with efficiency and a natural participation constraint, assuming the domain of one input good and one output good in which nobody prefers to consume more of the input good than what she has. We show that this possibility result does not survive and we lead to impossibility either when (i) somebody wants to consume the input good more than what she has; or when (ii) there are multiple input goods.     

How do technological innovations affect corporate investment and hiring?

In this paper, we study the relation between technological advancement, and corporate investment and hiring. We build a corporate investment model with dynamic technology conditions, and we find the optimal investment and labor inputs increase in response to technological innovation shocks. Consistent with the model predictions, we empirically show that corporate investment and hiring increase following technological advancements, using various measures of technological innovation. Further, we find the effect is stronger for firms in more innovative industry, firms with higher capital intensity and firms with higher market-to-book ratio. Our findings provide evidence for the endogenous growth theory, i.e., firms with successful innovations tend to expand in capital investment and employment, suggesting technological innovations are, to some extent, Hicks-neutral.     

Does organisational capital influence environmental strategies? Evidence from environmental innovation

As a result of increasing consumer awareness and stakeholder demands about environmental management, firms face stricter challenges surrounding the impact of business operations on the environment. In this regards, environmental innovation is one of the important ways of acting in harmony with the environment. Thus, the purpose of this study is to examine the impact of organisational capital on environmental innovation measured as the process innovation and product innovation. Using environmental innovation data from ASSET4 for the US listed firms between 2002 and 2018, our empirical results reveal a significant positive association between organisational capital and both the process innovation and product innovation. Furthermore, the relationship is stronger in high-profitability and sensitive industries subsamples. These results are robust to additional control variables and endogeneity tests. This study, while endorsing the resource-based view (RBV), provides important implications for the top management teams that organisational capital could be an important channel through which managers can boost environmental innovation.     

Does high-speed railway promote urban innovation? Evidence from China

Empirical discussion in the existing literature on the relationship between transportation infrastructure and innovation remains limited. As one of the most important transport infrastructures, China's high-speed railway (HSR) has greatly compressed the space-time distance and strengthened the linkages between cities, which may contribute to innovation activities. Using the panel data of 285 Chinese prefecture-level and above cities and employing the difference-in-differences (DID) model, this paper examines the impact of HSR opening and HSR service intensity on the urban innovation. Propensity score matching (PSM) together with DID (PSM-DID) method is utilized to address the potential estimation biases. The empirical results demonstrate that HSR has significantly improved the level of urban innovation. Heterogeneity analysis finds that the promotion effects of HSR on innovation are more remarkable in peripheral and small cities. Moreover, the effects of HSR on cities far away from the central and large cities are with higher significance and greater magnitude than cities close to central and large cities. For cities near central and large cities, the service intensity of HSR is more likely to improve their innovation level. In addition, we further find that service industries and private enterprises benefit more from the effect of HSR in promoting innovation. This study can provide robust evidence for the effect of HSR on promoting urban innovation, as well as policy enlightenment for innovation growth and sustainable economic development.     

Does digital service trade boost technological innovation?: International evidence

Digital technology is profoundly changing the international economic and trade pattern, and digital service trade is increasingly becoming an important carrier of transnational knowledge spillover. This study investigates the relationship between digital service trade and technological innovation. Based on the panel data of 131 countries from 2005 to 2020, empirical results show that digital service trade significantly promotes technological innovation. This study shows that digital service trade can promote technological innovation through four mechanisms: increasing income incentives, accelerating knowledge spillover, triggering trade liberalization, and promoting financial deepening. The results of panel threshold model show that economic development, urbanization, and population aging can lead to regime changes in the innovation effect of digital service trade. In addition, the results of heterogeneity test show that national characteristics such as economic development, per capita income, industrialization, and economic freedom, influence the innovation effect of digital service trade. Our findings have implications for developing an international innovation cooperation system based on digital service trade.     

Green innovation to respond to environmental regulation: How external knowledge adoption and green absorptive capacity matter?

Although environmental regulations have been considered as important forces of conducting green innovation, how and under what conditions they affect green innovation are still unclear. Drawing from institutional theory, this study used survey data from 237 manufacturing firms in China to investigate how two dimensions of environmental regulations (i.e., command and control regulation and market‐based regulation) affect green product innovation and green process innovation. Further, this article examined the mediating role of external knowledge adoption and the moderating role of green absorptive capacity. Our results indicate that both command and control regulation and market‐based regulation have positive influences on external knowledge adoption. External knowledge adoption fully mediates these positive relationships. In addition, green absorptive capacity only strengthens the positive impact of market‐based regulation on external knowledge adoption. Our study contributes to institutional theory and green innovation literature.     

How do firms achieve sustainability through green innovation under external pressures of environmental regulation and market turbulence?

Analyses in the fields of environmental and innovation research have hindered our understanding of the real effects of external drivers of firms' green innovation and sustainability behaviors on financial performance. This study compares the ways in which two different external factors drive firms to be green innovative: environmental regulation and market turbulence. By dividing green innovation into green process innovation and green product innovation, we propose that environmental regulation increases financial performance mainly through green process innovation rather than through green product innovation, and market turbulence affects financial performance mainly through green product innovation rather than through green process innovation. The results of an empirical analysis based on a mediation model and panel data on 472 Chinese listed firms for 2006–2017 lend support to our hypotheses. Our study contributes to the green innovation management and sustainability literature by offering a holistic framework for examining how firms pursue green innovation and sustainability in response to two different forms of external pressure.     

Does environmental innovation make us happy? An empirical investigation

The aim of this paper is to provide an efficient framework to study the relationship between happiness and eco-innovation, measured by eco-efficiency, considered as a subset of the wider question concerning the relationship between happiness and innovation. The conceptual background describes how happiness can be linked to environmental innovations, drawing potential relations among happiness, environment and innovations. An analytical model derives the relationship between happiness and eco-efficiency from a generic utility function. The empirical focus is on the effects of environmental innovation on population well-being for ten European countries over the period 1981–2011. Environmental innovation is measured by an eco-efficiency indicator (the percentage of total energy from combustible renewables and waste). Results from a panel data model show a positive correlation between eco-efficiency and happiness, linking countries' general well-being to environmental conditions, the pace at which they adopt eco-innovations, and the relative efficacy of the latter.     

How do corporate environmental policy and corporate reputation affect risk‐adjusted financial performance?

The current study aims to answer dual, related questions: Does corporate environmental policy affect corporate reputation, and does this link also influence risk‐adjusted profitability and company's risk? With a comprehensive framework involving analyses of each question, among a sample of firms traced by the Reputation Institute, this study reveals several notable results, after correcting for endogeneity biases. First, environmental engagement and green product innovation are both antecedents of corporate reputation. Second, corporate reputation has a positive impact on risk‐adjusted profitability and Z score indicator of financial distress risk. Thus, corporate environmental responsibility and green practices represent cospecialized assets that enhances an intangible asset, namely, corporate reputation. The latter influence constitutes a missing link between sustainable development and the firm's financial performance. Overall, environmental engagement and corporate reputation act as insurance‐like protections of firm competitiveness.     

How do green knowledge management and green technology innovation impact corporate environmental performance? Understanding the role of green knowledge acquisition

Increasing regulatory obligations to adapt and execute environmentally friendly operations make it critical for businesses to pursue strategies that can strengthen their competitive edge in the market. Academics and practitioners alike have recently gravitated toward exploring how knowledge acquisition activities might improve business outcomes. To address this growing research interest, this study investigates the critical roles of green knowledge acquisition in enhancing green knowledge management and green technology innovation activities in improving corporate environmental performance, positioning resource commitment as a moderator. The research model has been assessed using structural equation modeling with survey data from 283 Indian manufacturers, demonstrating that green knowledge acquisition significantly impacts green knowledge management and green technology innovation. The statistical findings also show that green technology innovation acts catalyzes the translation of green knowledge management into improved corporate environmental performance. The results demonstrate that resource commitment moderates green knowledge acquisition's interaction with green knowledge management and green technology innovation, providing practical insights enabling managers to focus on planning, allocating, and budgeting resources for effective green practices that can contribute to improving corporate environmental performance.     

Do financial penalties for environmental violations facilitate improvements in corporate environmental performance? An empirical investigation

Environmental regulations play an essential role in managing firm behavior and providing a reference point for the minimum standards of corporate environmental performance, yet certain firms fail to ensure their environmental performance meets these standards. This research focuses on public firms that the US government has penalized for violating environmental regulations and investigates whether these firms subsequently improved their environmental performance. Surprisingly, neither the receipt of a penalty for an environmental violation nor the imposition of a greater penalty was associated with improvements in environmental performance. Instead, a penalty for environmental violation predicted further, albeit mild, deterioration in environmental performance. While the existing literature has established that financial penalties deter most firms from committing environmental violations, this research contributes to this literature by revealing that these penalties fail to motivate firms that have violated environmental regulations to improve their environmental performance.     

Government policy and technological innovation—a suggested typology

Reports on the effects of government's role in stimulating technological development provide a mixed picture. Some policies have had the expected, stimulating effect and other policies have not. We suggest that specific characteristics of technologies that government has sought to stimulate have not been taken into account when governments formulated and implemented innovation policies. While technologies can be characterized according to more dimensions, we focus on two highly relevant characteristics. Technologies either develop in a discrete manner, independent of what specific knowledge has been developed in the past, or develop cumulatively. In addition, network effects may be present or absent in the market anticipated for the products for which a technology is used. A 2×2 typology of technological development ensues. We suggest that governments should consider developing policies to stimulate technological change keeping these characteristics in mind.     

Can innovation improve income inequality? Evidence from panel data

Income inequality is a source of social instability and armed conflict, which in turn are detrimental to economic development. This study examines the role of innovation in income inequality in twenty-three developed countries, using a panel mean group estimator that takes cross-sectional dependence into consideration. Three income inequality indicators are used: the Standardized World Income Inequality Database (SWIID), the University of Texas Inequality Project (UTIP), and the Estimated Household Income Inequality (EHII). The innovation indicators are patent applications and patents granted. The empirical results based on the common correlated effect mean group (CCEMG) reveal that innovation widens income inequality. We also investigate whether the innovation–income inequality nexus is subject to a country’s level of globalization and financial development. The findings suggest that the interaction terms between innovation with these two variables have positive effects on income inequality, whereas innovation failed to reduce income inequality. Globalization and financial development are found to drive income inequality. The empirical results are robust to different income inequality and innovation measures as well as estimation techniques.     

Can strategic flexibility help firms profit from product innovation?

Although it is generally acknowledged that product innovation is critical for firms to sustain their competitive advantages, innovating firms sometimes fail to obtain economic returns from product innovation. This study focuses on the moderating effect of strategic flexibility (composed of resource flexibility and coordination flexibility) on the relationship between product innovation and firm performance, in order to address an important but previously unexplored question: Can strategic flexibility help firms profit from product innovation? Our empirical test, utilizing a sample of 607 Chinese firms, reveals that the moderating effect of resource flexibility on the positive relationship between product innovation and firm performance is negative, while that of coordination flexibility is positive. Further, such moderating effects are especially likely to be profound for firms confronting a high level of competitive intensity. We conclude by discussing our contributions, the implications, and possible future extensions.     

Organizational response to environmental regulation: punctuated change or autogenesis?

Theory predicts that when faced with threatening new conditions, managers often attempt to preserve the status quo by creating a buffer between the organization and the outside world. This paper presents evidence that in response to new water pollution regulation, managers indeed created buffers of technology and personnel, but in some organizations this very equipment and personnel initiated a process of incremental change that led to better environmental protection, more efficient production, and in a few cases, entirely new product and production strategies. For public policy, this research suggests that environmental regulators should allow companies time and flexibility to learn and experiment. For organizational theory, this research suggests a link between punctuated‐equilibrium models of organizational dynamics ( Tushman and Romanelli, 1985 ) and theories of self‐organizing systems ( Drazin and Sandelands, 1992 ). That is, management may respond to external changes by attempting to preserve the status quo, but in so doing influence internal deep structures that then cause organizations to gradually evolve to different behaviours and shapes. Copyright © 2000 John Wiley & Sons, Ltd. and ERP Environment     

Market orientation practices enhancing corporate environmental performance via knowledge creation: Does environmental management system implementation matter?

The academic literature on environmental management has provided extensive insights into the determinants of corporate environmental performance. However, few empirical studies have explored whether and how three core components of corporate market orientation (i.e., customer orientation, competitor orientation, and interfunctional coordination) affect environmental performance. Building on institutional theory and the absorptive capacity perspective, this study investigates the relationships among market orientation, knowledge creation, and environmental performance, as well as the moderating effects of environmental management system implementation. On the basis of survey data from 237 Chinese manufacturing firms, we used hierarchical multiple regression analyses to test the hypotheses. The findings indicate that knowledge creation completely mediates the influence of competitor orientation on environmental performance and partially mediates the influence of customer orientation and interfunctional coordination on environmental performance. In addition, environmental management system implementation positively moderates the relationship between knowledge exchange and environmental performance.