Premium
Sustaining the sustainable development: How do firms turn government green subsidies into financial performance through green innovation?
Author(s) -
Hu Die,
Qiu Lu,
She Maoyan,
Wang Yu
Publication year - 2021
Publication title -
business strategy and the environment
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.123
H-Index - 105
eISSN - 1099-0836
pISSN - 0964-4733
DOI - 10.1002/bse.2746
Subject(s) - subsidy , green innovation , business , government (linguistics) , product innovation , industrial organization , product (mathematics) , green growth , sustainable development , economics , market economy , linguistics , philosophy , geometry , mathematics , political science , law
Abstract The impact of government green subsidies on firms' green innovation behaviors and sustainable development has been recognized in the existing literature, but the deep relationship remains poorly understood. This study aims to examine the mechanism of how government green subsidies influence firms' financial performance via green innovation and how the mediating effect varies under different contingent conditions. Empirical results based on data of Chinese listed companies between 2006 and 2018 reveal that green subsidies have positive effects on green process and product innovation, but only green product innovation can rise higher financial performance, which further verifies that green subsidies positively influence financial performance through green product innovation rather than green process innovation. In addition, both higher absorptive capacity and higher market turbulence strengthen the indirect effect of green subsidies on firms' financial performance via green product innovation. Our study provides useful implications for enterprises by revealing the influence mechanism of green subsidies on financial performance through green innovation under different leveraging levels of internal and external conditions. It also provides basis for the government to formulate relevant environmental policies.