“Risk” or “Opportunity”? The High Sensitivity of Corporate Green Innovation to Environmental Policy Uncertainty: Evidence from China

Xiaoming Peng, Yihao Li, Chengxin Guo (), Liang Peng and Sijin Tan
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Xiaoming Peng: Zhongbei College, Nanjing Normal University, Zhenjiang 212300, China
Yihao Li: General Graduate School, Dongshin University, Naju 158245, Jeollanam-do, Republic of Korea
Chengxin Guo: General Graduate School, Dongshin University, Naju 158245, Jeollanam-do, Republic of Korea
Liang Peng: School of Business, Nanjing Normal University, Nanjing 210023, China
Sijin Tan: School of Business, Nanjing Normal University, Nanjing 210023, China

Sustainability, 2023, vol. 15, issue 11, 1-18

Abstract: China is constantly promoting green economic transformation through environmental policy adjustment. However, what impact the uncertainty brought about by environmental policy adjustment will have on corporate green innovation has become an issue worth paying attention to. Based on the option theory, this paper establishes a logical framework to explain the impact of environmental policy uncertainty on corporate green innovation through risk-taking and uses the China environmental policy uncertainty and the data of A-share listed companies for empirical tests. The findings are as follows: in the Chinese institutional context, environmental policy uncertainty enhances corporate green innovation inputs and outputs, and effectively motivates corporations to improve their green innovation levels. The findings are as follows: in the Chinese institutional context, environmental policy uncertainty is perceived by firms as an opportunity rather than a risk, enhancing corporate green innovation inputs and outputs and effectively motivating corporations to improve their green innovation levels. The mechanism test shows that environmental policy uncertainty increases the level of corporate risk taking, thus stimulating green innovation. The mediating effect of corporate risk taking is supported. The heterogeneity analysis verifies the asymmetric influence of environmental policy uncertainty on corporate green innovation. This study reveals an important link between the external institutional environment and corporate green innovation in emerging economies, and the policy implication is that governments need to facilitate the transition to a green economy through sound environmental policy adjustments.

Keywords: environmental policy uncertainty; corporate risk taking; green innovation (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2023
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