School of Economics and Management Tsinghua U., China
There are various perspectives on the benefits of green innovation. Building on previous research, this study examines green innovation through the lens of resilience theory, highlighting how innovative activities contribute to corporate sustainability. We argue that green innovation enables firms to respond more effectively to evolving environmental policies, leading to improved performance and a quicker recovery from periods of underperformance. Extending prior work that suggests green innovation enhances both environmental and social performance, we further explore whether this effect persists under conditions of external uncertainty. As new environmental regulations emerge, organizations may face fines and negative market reactions due to non-compliance, which can shift stakeholder expectations, as reflected in ESG scores. Firms with higher levels of green innovation are better equipped to manage regulatory changes due to their enhanced resilience, reducing the need for additional ESG management while maintaining stable performance. This dynamic also interacts with local government emphasis on environmental protection, highlighting challenges in accessing the social capital necessary to build resilience. For well-performing firms, this serves as a support mechanism; however, for underperforming firms, heightened local focus on environmental protection may redirect resources toward already successful enterprises, thereby prolonging the time needed for these firms to recover their ESG scores.
