Sustainable business practices, green innovation, and firm performance evidence from China’s emerging market

Abstract

This study examines the influence of sustainable business practice (SBP) on firm performance in China, with consideration of its mediating effect of green innovation. Based on the resource-based view and stakeholder theory, the panel data of Chinese A-share listed companies (2019-2022) are examined through the fixed-effect model and the bootstrap test. The findings indicate that SBP substantially improves accounting-based (ROA) as well as market-based (Tobin’s Q) performance indicators and that green innovation substantially mediates this partial process; these effects are especially robust for high-polluting industries and subsidised firms. The findings present new evidence from the world’s largest emerging market on how the change of green innovation creates competitiveness out of greening, which has important implications for corporate management and public policy on green transformation.