Are environmentally friendly firms more innovation-oriented?

Abstract

This study aims to explore the relationship between corporate environmental responsibility and firm’s innovation decision. It proposes that firms investing in environmental protection are more likely to have strong dynamic capabilities to proactively respond to the growing environmental awareness and movement, which in turn can trigger their innovation intention. Moreover, building on stakeholder theory, this study also hypothesizes an indirect relationship between firms’ environmental responsibility and innovation decision mediated by government support. The hypotheses are tested by analyzing the Chinese Private Enterprise Survey data collected in 2010 and are supported. The theoretical and practical implications of the findings are discussed.