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Not all sparks ignite the same flame: Firm AI innovation and ESG performance

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Listed:
  • Zhou, Zixun
  • Zhou, Xinyu
  • Zhang, Xuezhi
  • He, Qi

Abstract

Technological innovation exhibits dual impacts—fueling progress while exacerbating disparities—especially regarding artificial intelligence (AI). While AI’s productivity benefits are well documented, its role in corporate sustainability remains contentious. Drawing on divergent perspectives from the resource-based view and stakeholder theory, this study examines the differential effects of firm-level AI innovation on Environmental, Social, and Governance (ESG) performance. Leveraging proprietary AI patent and hiring data from Chinese listed firms, we find that AI innovation significantly promotes ESG performance—particularly in governance and social dimensions—but not in environmental outcomes. Mechanism analyses reveal expanded AI talent recruitment, strengthened employee protection awareness, and improved corporate transparency as plausible channels. Moreover, AI innovation mitigates greenwashing behavior, corporate misconduct, and negative media coverage. By unpacking AI innovation-driven sustainability as a contested nexus, we advance the understanding of how technological capabilities and stakeholder accountability can reconcile ESG trade-offs.

Suggested Citation

  • Zhou, Zixun & Zhou, Xinyu & Zhang, Xuezhi & He, Qi, 2025. "Not all sparks ignite the same flame: Firm AI innovation and ESG performance," Journal of Business Research, Elsevier, vol. 201(C).
    • Handle: RePEc:eee:jbrese:v:201:y:2025:i:c:s0148296325005612
    DOI: 10.1016/j.jbusres.2025.115738
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