Green makes bigger: green innovation and firms’ acquisition behavior

Purpose This study aims to investigate how corporate green innovation influences mergers and acquisitions (M&As) and post-acquisition performance. It explores how stakeholder perceptions and competitive capability shaped by green innovation affect M&A likelihood, frequency, scale and deal performance. The findings offer strategic insights for aligning corporate economic and environmental objectives. Design/methodology/approach Using a sample of Chinese listed firms from 2011 to 2023, this study empirically examines how green innovation affects M&A activity and post-acquisition performance. Robustness is ensured using instrumental variables, Heckman two-step regressions and propensity score matching approaches, addressing endogeneity and selection bias. Findings Firms with a higher level of green innovation engage more actively in M&As, undertake larger transactions and achieve better post-acquisition performance. The effect is particularly pronounced among firms with lower stakeholder support and those operating in more competitive industries, highlighting stakeholder support and competitive capability as key underlying mechanisms. Moreover, these firms tend to negotiate lower acquisition premiums, reflecting their enhanced bargaining power. Robustness tests confirm that green innovation significantly shapes corporate acquisitive behavior and performance. Originality/value To the best of the authors’ knowledge, this research is among the first to link green innovation with M&A outcomes, significantly extending existing literature beyond general firm performance. By incorporating stakeholder theory and natural-resource-based view, the study highlights stakeholder support and competitive capability as potential channels in green innovation-driven M&A decisions. It uniquely identifies green innovation’s role in shaping acquisition activities, enriching corporate governance and sustainability discussions.