Institutional Pressures and Corporate Green Innovation: Evidence from Chinese Public Enterprises

Although corporate response to institutional pressures on the environmental agenda seems to be foreseeable, there is a limited understanding of the mechanisms that influence the uptake of green innovation. In this article, we examine the above question in the context of China’s green credit policy. By integrating institutional theory with resource dependence theory (RDT), a premier framework for understanding organisation-environment relations, we theorise that the change of internal resource dependence is a conduit by which institutional pressures trigger corporate green innovation. This study empirically focuses on 1,485 listed Chinese firms from 2007 to 2019, during which the green credit policy was implemented in 2012. We find that the policy leads to financial constraints that stimulate corporate green innovation. Furthermore, the relationship between green credit policy and financial constraints is more significant for firms with a higher level of financial dependence on banks.