Business strategy and sustainable development: Evidence from China

Abstract This study examines whether and how business strategies affect firms' sustainable development from the view of green innovation. We show that firms following prospector strategy engage in less sustainable development behaviors than those following defender strategies. The negative relation between business strategy and green innovation continues to hold when addressing robustness with alternatives of business strategy and green innovation and addressing potential endogeneity with instrumental variable. We further find that political connection strengthens whereas environmental regulation weakens the negative relation between business strategy and green innovation. Finally, we explore the economic consequences of green innovation caused by strategic differences. Regrettably, the win–win situation of environment and development does not come true.