How do ESG affect the spillover of green innovation among peer firms? Mechanism discussion and performance study

This study presents a theoretical framework for studying the green innovation spillover effect from corporate environmental, social, and governance (ESG) and explores the underlying influence of this effect on sustainability performance. By regressing panel data on China’s A-share listed enterprises from 2012 to 2020, the results support that the ESG of focal companies have significant green innovation spillover effects in the industry, that occurs through the alleviation of financing constraints and improvement in the executive environmental protection awareness of peer enterprises. Notably, industrial enterprises are constrained by their own attributes, therefore, this effect is not obvious, however, the ESG of non-industrial enterprises can guide peer companies to adopt green innovation behaviors and improve sustainability performance. This study enriches our understanding of ESG. Furthermore, our findings have important implications for accelerating the construction of countries’ ESG systems, promoting corporate sustainability, and implementing emission-reduction targets.