Do Government-Based Customers Promote Green Innovation? Evidence from China

ABSTRACT

This study investigates whether and how government-based customers affect corporate green innovation based on institutional theory and the resourced-based view. Using data from Chinese listed companies and hand-collected government-based customers among firms’ top five customers by distinguishing ultimate property rights, we find that government-based customers can promote upstream firms’ green innovation. This result is robust after conducting a series of robustness checks and controlling for endogeneity issues. Mechanism tests show that enhancing environmental awareness and providing resource support are two mechanisms through which government-based customers affect corporate green innovation. Further tests indicate that non-state-owned enterprises, heavily polluting industries, and fierce market competition can strengthen the positive impact of government-based customers on corporate green innovation. Overall, these findings suggest that government-based customers are a contributing factor for corporate green innovation, which deepens our understanding of the relationship between the government and enterprises in emerging markets.

KEYWORDS:

• Government-based customers
• corporate green innovation
• institutional theory
• the resource-based view

JEL:

• G14
• G30
• H57
• L14

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Supplementary Material

Supplemental data for this article can be accessed online at https://doi.org/10.1080/1540496X.2023.2298278

Notes

1. http://www.gov.cn/zhengce/content/2015-02/27/content_9504.htm? ttrs=1 (in Chinese).

2. Although government agencies and state-owned enterprises (SOEs) are inherently different in nature and function, SOEs are obligated to fulfill government mandates and are the primary subjects of government social responsibility, such as environmental protection (Li, Song, and Wu 2015). When government agencies and SOEs act as customers in the product market, they can exert the same pressure on firms to improve their environmental performance. Meanwhile, government agencies and their controlled SOEs possess resource advantages (Li, Song, and Wu 2015). Therefore, this paper follows Dou, Yuan, and Chen (2019) and defines government agencies and SOEs together as government-based customers.

3. In this process, the change of a firm’s name and repeated innovation activities (same patents in a listed firm) are considered to ensure the accuracy of the final data.

4. Chinese listed firms disclose only their five main customers in their annual reports, and thus, this study takes only the top five customers into consideration.

5. Following Hall, Jaffe, and Trajtenberg (2005), we use the 10-year period from 1999 to 2008 to calculate the weight factors computed from the application-grant empirical distribution.

6. Compared with the regression in Column (1) without an independent variable, the regressions in Columns (2) and (4) in Table 2 on the benchmark above show a significant increase in R² (△R² = 8.35*** and 7.23***, respectively), indicating that GBC_DUM has increasing explanatory power concerning green innovation performance.

7. The variable equals 1 if the company is registered in Nanjing, Luoyang, Kaifeng, Beijing, Hangzhou, Anyang, Zhengzhou and Xi’an and 0 otherwise.

Additional information

Funding

This work was supported by the Hunan University.