Economic policy uncertainty and corporate green innovation

Liyuan Zhang, Zhenqing Luo, Xiaoyuan Yu, Qiming Yang and Jiancong Wang

International Review of Financial Analysis, 2025, vol. 97, issue C

Abstract: Economic policy uncertainty significantly influences corporate strategy, yet its varied effects on environmental innovation remain insufficiently explored. While existing research examines general innovation responses to uncertainty, limited attention has addressed how policy volatility distinctly affects the quality versus quantity of green innovation initiatives, and the role of organizational resilience in buffering these effects represents a critical gap in current understanding. This study investigates these relationships using a comprehensive dataset of Chinese A-share listed companies (2010−2022), employing novel metrics for policy uncertainty and organizational resilience. Through panel analysis and rigorous robustness testing, we uncover differential effects of policy uncertainty on environmental innovation dimensions, revealing an inverted U-shaped relationship between uncertainty and innovation quantity, while demonstrating a positive linear impact on innovation quality. Organizational resilience positively moderates these relationships, although its buffering effect diminishes under extreme uncertainty, with stronger effects observed among non-state enterprises and firms outside heavily polluting sectors. These insights advance understanding of how policy uncertainty shapes corporate environmental initiatives while highlighting organizational resilience as a crucial moderating factor, offering practical guidance for business leaders navigating environmental innovation amid uncertainty and informing policy design to support sustainable development.

Keywords: Economic policy uncertainty; Green innovation; Organizational resilience; Sustainable innovation; Environmental strategy; Corporate adaptation (search for similar items in EconPapers)
JEL-codes: L25 M14 O31 Q55 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:97:y:2025:i:c:s1057521924007294

DOI: 10.1016/j.irfa.2024.103797

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