Unravelling the bidirectional relationship between corporate environmental responsibility and technological innovation

In the contemporary landscape, Corporate Environmental Responsibility (CER) and technological innovation stand as pivotal issues, yet their reciprocal effects remain incompletely understood. This study aims to elucidate the dynamic causal relationship between CER and investments in technological innovation. Employing panel vector autoregression (PVAR) alongside a system generalized method of moment (System GMM), we analyze an unbalanced panel dataset comprising 611 firms across the service and technology sectors in the US from 2011 to 2017. Data sourced from the CSRHub database and Thomson Eikon are utilised for this purpose. Our findings unveil a positive bidirectional link between CER and technological innovation. Granger causality tests provide further validation, highlighting a dual dependency between technological innovation and CER. This study contributes to the concept of a virtuous circle, wherein firms are motivated by both value creation and the pursuit of values. It delineates CER-driven technological innovations as endeavors towards ‘doing the right things', juxtaposed with technological innovation-driven CER, which underscores the importance of ‘doing things right'.