ABSTRACT Firms proactively maintain social legitimacy by demonstrating accountability to external audiences, especially those in close geographic proximity. However, existing literature provides limited insights into how local audiences' attention reshapes corporate green innovation activities. Using an internal dataset, we find that local public attention significantly promotes green innovation, suggesting that geographic proximity enhances corporate oversight and accountability. We identify risk perception and reputation enhancement as the primary channels. To establish the causality, we leverage the first‐time inclusion of a firm's ultimate controller in the Hurun Rich List as an exogenous shock. Additionally, we employ the cumulative number of cities included in the “Broadband China” initiative as an instrumental variable, confirming the robustness of our results. Further analysis reveals that firms strategically focus on green innovation projects that deliver quicker and more tangible environmental benefits, allowing local residents to perceive improvements more immediately. Our findings highlight that local communities, as direct beneficiaries of firms' energy‐saving and emission‐reduction efforts, can act as a catalyst for corporate green innovation, thereby offering new policy insights for fostering green innovation.
Pan et al. (Mon,) studied this question.