How technical standards transform ESG performance into competitive advantage: evidence from China

In an increasingly complex international landscape, a critical question arises: How can firms transform their fulfilment of ESG responsibilities into a competitive advantage through technological innovation? On the basis of data from 4,847 Chinese A-share listed companies from 2009 to 2023, this study employs a fixed-effects model and empirical strategies such as the instrumental variable approach to investigate how corporate participation in the formulation of technical standards amplifies the positive impact of ESG performance on technological innovation, thereby revealing the pathway through which ESG performance is converted into corporate competitive advantage. Our findings indicate that corporate ESG performance significantly promotes technological innovation, a conclusion that remains robust after a series of tests. More importantly, participation in the formulation of technical standards strengthens the relationship between ESG performance and technological innovation, creating a synergistic effect. Mechanism analysis reveals that technical standards primarily enable ESG performance to drive innovation and build competitive advantage through two pathways: the ‘information effect’ and the ‘incentive effect’. Furthermore, this study acknowledges limitations regarding the sample’s universality and the diverse measurements of technical standards, which warrant further examination in future research.