Firm carbon orientation and green innovation: Does green intellectual capital matter?

Purpose In the context of carbon peaking and carbon neutrality goals, effectively promoting sustainability has become essential. Considering the need to reduce carbon emissions in the climate-sustainability era, this study investigates the impact of firms’ carbon orientation (FCO) on green innovation (GI). Drawing on the legitimacy theory, this study shows that FCO is a critical driver of GI, as it enables firms to enhance their environmental legitimacy and strategically leverage their innovation capabilities to translate sustainable commitments into GI outcomes. Moreover, by integrating legitimacy and resource-based view (RBV), this study has also argued that the effect of FCO on GI depends on their green intellectual capital (GIC) because by improving resource efficiency and decreasing carbon emissions, it assists businesses in turning their sustainable pledges into boosts. Design/methodology/approach The textual analysis was employed to construct FCO and GIC. The data was employed from 2016 to 2022 due to the Paris Agreement. The fixed-effect regression model was used for baseline regression analysis after utilizing the Hausman test to evaluate how well the fixed-effects and random-effects models agreed. Further analyses were performed to check the robustness of the result and endogeneity issue. Findings The results showed that FCO significantly affects GI. GIC and its dimensions enhance the impact of FCO on GI. Additionally, the series of analyses reveal that the effects of FCO and GIC on GI are robust and exhibit exogenous. Originality/value This study pioneered the development of measures for FCO and GIC in Chinese manufacturing firms through textual analysis. It highlights the critical role of FCO as a behavioral factor in promoting GI and reveals the importance of GIC in enhancing the impact of FCO on GI.