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Linking Environmental Regulation and Financial Performance: The Mediating Role of Green Dynamic Capability and Sustainable Innovation

Author

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  • Xinpeng Xing

    (School of Business, Jiangnan University, Wuxi 214122, China)

  • Tiansen Liu

    (School of Economics and Management, Harbin Engineering University, Harbin 150001, China
    School of Social and Behavioral Sciences, Nanjing University, Nanjing 210023, China)

  • Lin Shen

    (School of Business, Jiangnan University, Wuxi 214122, China)

  • Jianhua Wang

    (School of Business, Jiangnan University, Wuxi 214122, China)

Abstract

This study develops a multiple mediating model for exploring the link between environmental regulation and financial performance through green dynamic capability, sustainability exploration/exploitation innovation, based on the data from 355 Chinese manufacturing firms. Empirical results support a mediating role of green dynamic capability and sustainability exploration/exploitation in the link between environmental regulation and financial performance, respectively. What’s more, our findings indicate that environmental regulation can help improve financial performance via two multiple mediating paths, i.e., green dynamic capability and sustainability exploration innovation, as well as green dynamic capability and sustainability exploitation innovation. These key findings will help to understand how important green dynamic capability and sustainable innovation is when Chinese manufacturing firms establish a business-politics tie.

Suggested Citation

  • Xinpeng Xing & Tiansen Liu & Lin Shen & Jianhua Wang, 2020. "Linking Environmental Regulation and Financial Performance: The Mediating Role of Green Dynamic Capability and Sustainable Innovation," Sustainability, MDPI, vol. 12(3), pages 1-22, January.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:3:p:1007-:d:314669
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    7. Han Xiao & Abdullah Al Mamun & Mohammad Masukujjaman & Qing Yang, 2023. "Modelling the significance of strategic orientation on green innovation: mediation of green dynamic capabilities," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-15, December.
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