Ethical corporate governance and innovation performance in Chinese manufacturing firms: The mediating role of internal resource allocation

Abstract

Ethical corporate governance plays an important role in promoting sustainable innovation and responsible managerial decision-making, particularly in the context of technological disruption and industrial transformation. In Chinese manufacturing firms, innovation requires not only financial support but also effective internal resource allocation to sustain long-term competitiveness. However, existing studies have primarily focused on the direct relationship between corporate governance and innovation performance, with limited attention given to the internal managerial processes that connect governance practices with innovation outcomes. Therefore, this study reviews the literature on ethical corporate governance, internal resource allocation, and innovation performance in Chinese manufacturing firms. A narrative literature review approach was adopted, and relevant peer-reviewed studies published in major academic journals were identified through a structured literature search of the Scopus, Web of Science, and Google Scholar databases using predefined keywords related to the research topic. The review examines governance mechanisms, including board independence, CEO duality, board size, and ownership concentration, from ethical governance and management accounting perspectives. This review contributes theoretically by integrating Agency Theory and management accounting perspectives to explain how internal resource allocation functions as a mechanism linking ethical corporate governance with innovation performance. The study also identifies key research gaps and proposes directions for future research, providing a conceptual foundation for advancing governance and innovation research in Chinese manufacturing firms.