Corporate ESG and Innovation Efficiency: A Re-Examination from the Perspective of Resource Allocation

Abstract

Environmental, social, and governance (ESG) serves as an important breakthrough for enterprises to advance sustainable development and promote high-quality development. It is also a key pathway for the capital market to move toward sustainability. A sound evaluation of the innovation value of ESG plays an important role in accelerating the establishment of China as a strong science and technology country in the new development stage. Using A-share listed companies in Shanghai and Shenzhen from 2012 to 2021 as the empirical sample, the present study conducts empirical tests based on an enterprise fixed effects model. The results show that: Firstly, stronger ESG performance improves corporate innovation efficiency and produces an efficiency-enhancing effect on innovation. This conclusion holds after a series of robustness checks and after addressing potential endogeneity. Secondly, ESG performance increases corporate innovation efficiency through three channels: higher R&D investment, relief of financing constraints, and lower agency costs. In other words, ESG improves innovation efficiency through stronger R&D incentives and cost-saving effects. Thirdly, the positive effect of ESG on innovation efficiency varies across enterprises. The effect is more pronounced in regions with higher marketization and among private enterprises and those with returnee executives. This paper provides empirical evidence on optimizing innovation resource allocation through ESG-driven strategic transformation in the new development stage.

Keywords

environmental, social, and governance (ESG) / corporate innovation / innovation efficiency / high-quality development

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Higher Education Press