Can the social trust promote corporate green innovation? Evidence from China

Abstract

Corporate green innovation has played a crucial role in balancing profitability and environmental protection. The existing research on determinant factors of green innovation has its main defects in emphasizing excessively enterprise’s formal institutional environment and neglecting the informal institutional environment, causing an incomplete understanding of the relationship between institutional environments and corporate green innovation. To bridge this gap, using a sample of Shanghai and Shenzhen A-share listed firms in manufacturing industry during the period of 2010–2016, we investigate how social trust, an important informal institutions, affects corporate green innovation. Our results show that social trust is positively associated with green innovation, remaining valid after applying endogenous and robustness tests. In addition, the positive relationship between social trust and green innovation is more prominent when the enterprise is non-state-owned or locates in a looser command-and-control (CAC) environmental regulations region. Further analysis shows that social trust boosts corporate green innovation via promoting knowledge sharing, decreasing financing constraints, and fulfilling more corporate social responsibility (CSR). This paper enriches the literature concerning social trust and green innovation and draws back more public attention on the role of informal institutions play in promoting green innovation.