Green Innovation
Green innovation refers to new or modified processes, techniques, systems, and products intended to prevent or reduce negative environmental impacts (Kemp et al., 2001; Rennings, 2000; Schiederig et al., 2012). It is often interchangeably used with three other notions: sustainable innovation, environmental innovation, and ecological innovation (Dangelico & Pujari, 2010; Rennings, 2000; Schiederig et al., 2012).
Firms are motivated to engage in green innovation due to business and social incentives. First, green innovation can help improve firms’ financial benefits and improve firms’ business competitiveness (Chen et al., 2006; Cheng et al., 2014; Lee & Min, 2015; Xie et al., 2019). Specifically, it helps save resources, reduce production and operation costs, improve energy efficiency, and develop new market opportunities, thus achieving better business performance (Chen et al., 2006; Dangelico & Pujari, 2010). Second, green innovation creates social value for firms. Under the rise of consumer environmental consciousness (Peattie, 2008), green innovation helps firms build a green image and reputation for outsiders. This enhances firms’ environmental legitimacy. Third, firms can gain more policy and financial support from governments who are under pressure to go green through green subsidies, green loans, and green R&D investments (Guo et al., 2016; Huang et al., 2019; Xia et al., 2022). Therefore, all the above benefits promote firms’ engagement in green innovation.
However, in spite of various advantages, green innovation concerns discourage firms from investing in green innovation. First, green innovation is inherently costly, uncertain, risky, and long-term based (Chrisman & Patel, 2012 & Ma et al., 2019). Additionally, in contrast with other innovations, green innovation suffers from double-externality problems: 1) innovating firms are unable to prevent other firms or society from enjoying the innovation while the costs are covered by the innovator alone (Liu et al., 2024) and 2) green innovation is able to mitigate negative externalities stemming from environmental pollutions but such environmental pollutions are hard to be quantified, creating a situation where firms generally lack the incentive to minimize their environmental impact to a socially desirable level (Rennings, 2000; Xia et al., 2022).
Due to the abovementioned complexity of green innovation, most literature has focused on firm-level factors to explore how and to what extent firms will conduct green innovation. Based on the resource-based view (RBV) (Barney, 1991), it is suggested that firms with sufficient resources and innovative capacities will be more likely to adopt green innovation (Ardito et al., 2019; Cheng, 2020; Horbach, 2008; Jefferson et al., 2003; Wagner, 2007). For instance, Lee and Min (2015) demonstrate that firms with green R&D investments can develop unique resources and capacities that result in better performance.
Emerging literature focuses on how different firms’ ownership (e.g., private ownership, state ownership, institutions) in impacting green innovation, especially the role of state ownership (Chen et al., 2014; Jefferson et al., 2003; Qu & Pan, 2023; Tan, 2002). However, the relationship between SOEs and green innovation has not yet reached a consensus. One group of scholars finds that firms with high levels of state ownership are more likely to conduct green innovation because of their resource access advantages and more environmental responsibilities (Chen et al., 2014; Zhou et al., 2017). In contrast, other literature suggests that managers in firms with state ownership are often risk-averse and reluctant to engage in green innovation (Tan, 2002; Tihanyi et al., 2019). Also, state owned firms have insufficient capacities needed for green innovation (Liu et al., 2020).
Given the inconsistent findings in the literature, exploring the contingencies under which state ownership can increase or decrease green innovation is essential. In the era of rapid development of digitization, we cannot ignore the power of digital factors in supporting SOEs’ green innovation (Karimi Takalo et al., 2021). To address the aforementioned research void, our study builds on prior green innovation research and tries to resolve these theoretical and empirical inconsistencies by exploring the moderating role of digital-related factors in the relationship between state ownership and green innovation.