Econometric panel analysis reveals that ESG uncertainty boosts R&D investment in firms, suggesting businesses innovate proactively to hedge against regulatory and operational risks.
Key Points
Investigate the impact of environmental, social, and governance (ESG) uncertainty on corporate innovation and evaluate whether firms leverage R&D investment as a strategic response to regulatory ambiguity.
Estimated the relationship between ESG uncertainty and R&D spending using multidimensional ordinary least squares (OLS) regressions on firm-level panel data.
Conducted channel and moderation analyses across firm production costs, baseline ESG performance, and state ownership status.
Employed variations in fine particulate matter (PM2.5) concentrations as an instrumental variable to control for potential endogeneity.
Identified a significant positive relationship between ESG uncertainty and corporate R&D investment, demonstrating proactive innovation responses to ESG risks.
Observed stronger innovation responses in firms facing high production costs and those with higher baseline ESG performance.
Found that state-owned enterprises (SOEs) exhibit significantly lower sensitivity to ESG uncertainty due to policy stability and government support.