Purpose This study examines how firms mitigate behavioral and environmental uncertainty in markets by implementing governance devices – external monitoring and takeover protection – that foster stakeholders’ investment in green innovation. We also examine the moderating role of internationalization, which tends to increase behavioral uncertainty while mitigating environmental uncertainty. Design/methodology/approach Using panel regression models, we test the effects of external monitoring and takeover protection on firms’ green innovation and the moderating role of internationalization. The analysis draws on 2,181 firm-year observations from 243 S&P 500 firms over a 12-year period. Findings The results indicate that the effectiveness of governance devices in promoting green innovation depends on firms’ level of internationalization. External monitoring enhances green innovation primarily in less internationalized firms, whereas takeover protection becomes more effective in highly internationalized firms by mitigating environmental uncertainty. Research limitations/implications This study adopts a conceptual and device-oriented approach to uncertainty, focusing on how specific governance mechanisms address different dimensions of stakeholders’ uncertainty rather than on the direct empirical measurement of uncertainty or stakeholders’ investment levels. Future research could build on our framework by incorporating explicit measures of uncertainty perceptions and stakeholder investment to further validate and extend these relationships. Nevertheless, this study provides a robust theoretical and practical framework that enriches the existing literature and offers a foundation for future research to examine additional mechanisms or international factors with a critical role in managing uncertainty and fostering green innovation in complex global contexts. Practical implications To address stakeholders’ concerns, managers should implement third-party monitoring to enhance transparency and adopt anti-takeover measures to protect long-term green investments. Managers should consider firms’ internationalization when designing these mechanisms to achieve effective green strategies. Social implications This work provides robust theoretical contributions and practical solutions to contribute reducing climate change as a joint strategy for firms and society. Firms should proactively design international governance architectures that combine adaptive local responsiveness with globally integrated control mechanisms, enabling green innovation strategies to remain credible, resilient and attractive to stakeholders over time. Originality/value This research offers a roadmap enabling firms to identify distinct uncertainty types and deploy tailored solutions. External monitoring addresses behavioral uncertainty, while takeover protection mitigates environmental uncertainty and internationalization shapes these effects.
Bueno-García et al. (Tue,) studied this question.