Green innovation of industrial firms under environmental dilemma: the impact of environmental performance shortfalls on green innovation

Stricter regulations and intensifying market competition often cause firms to miss their environmental performance targets. However, the strategic responses of firms to these environmental shortfalls through green innovation remain underexplored. Using data of 2,164 Chinese industrial firms from 2007 to 2022, we apply the behavioural theory of the firm to argue that environmental performance shortfalls trigger both problemistic search and collaborative search through green patenting, particularly collaborative green patenting. Mediation analysis reveals that these effects are primarily driven by heightened executive environmental awareness and stronger industry–university–research collaboration. We also demonstrate that pollution-intensive firms rely more on collaborative green innovation, whereas financially constrained firms opt for independent patenting. By extending the behavioural theory of the firm to environmental performance, this study uncovers key drivers of green innovation and offers practical guidance for aligning innovation with sustainability goals.