Responding to perceived environmental policy uncertainty with green technological innovation engagement: Evidence from a text-based measure

The literature on corporate decision-making preferences regarding green technological innovation (GTI) in the context of uncertainty remains inconclusive. As a supplement, this study focuses on perceived environmental policy uncertainty (EPU) and its impact on corporate GTI engagement. In contrast with the existing literature, which typically treats EPU as a regionally homogeneous factor without incorporating the role of how decision makers perceive it, this study proposes a text-based measure of firm-level EPU perception. This is achieved via textual analysis of board reports. In light of threat-rigidity and antifragility theories, this study posits that both adverse and beneficial effects of board EPU perception on corporate GTI participation are theoretically possible. In the context of perceived uncertainty, the threat-rigidity effect prompts decision makers to adopt a conservative stance with regard to GTI, whereas the antifragility effect has the opposite effect. The empirical findings derived from a sample comprising Chinese firms corroborate the latter argument, namely that board EPU perception has an antifragility effect, driving corporate active GTI participation. Moreover, this effect is more pronounced in firms with boards possessing stronger research and development (R&D) backgrounds, as R&D backgrounds lead boards to exhibit greater willingness to innovate and to utilise R&D resources more efficiently. This study represents an initial endeavour to offer a longitudinal indicator of firm-level EPU perception. The findings not only contribute to a more rigorous understanding of corporate eco-friendly risk-taking behaviour, but also provide insights for regulators and shareholders on the governance of corporate GTI in the context of EPU.