CEO social capital and green innovation: evidence from China

What the paper says

Purpose Research has extensively studied the physical and psychological attributes of chief executive officers (CEOs) in relation to green innovation; however, the effect of their social capital largely remains unexplored. This study aims to investigate whether CEOs’ social capital contributes to the firm’s green innovation and identifies channels that impact this association. Design/methodology/approach The study employs a panel data regression model with firm-level clustered standard errors and analyzes 6,944 CEOs in 3,626 Chinese firms from 2009 to 2022. The study also estimates alternative specification approaches and uses various endogeneity tests, such as lag of explanatory variables, propensity score matching, difference-in-differences and two-stage least squares, to ensure that the findings are reliable. Findings The findings broadly support the prediction that CEOs possessing greater social capital carry out more green innovation than those having lower social capital. Furthermore, access to resources, reputational concerns and trustworthiness are important attributes that encourage CEOs with greater social capital to undertake more green innovation. The findings exhibit that state ownership and industry competition magnify the effect of CEO social capital on green innovation, whereas financial constraints exert no meaningful influence. Practical implications The study recommends that executives with greater social capital be elevated to the firm’s upper echelon, as it positively influences sustainability and has environmental implications. Investors and policymakers can leverage CEO social capital to protect their interests and promote sustainability. Social implications The study suggests that CEO social capital is a key mechanism for aligning the interests of executives, businesses and society. By capitalizing on CEOs’ social capital, the long-term economic and sustainability goals can be achieved, fostering broader social well-being. Originality/value To the best of the /authors’ knowledge, this is the first study to empirically show that CEO social capital contributes to firm green innovation. Moreover, the study advances the literature by demonstrating that resource access, reputation and trustworthiness serve as mechanisms in the relationship between CEO social capital and green innovation.