Institutional Innovation Policy and Enterprise ESG Performance: Theoretical Analysis and Empirical Evidence from China

The tension between corporate growth and sustainability is a common governance dilemma faced by transitional economies in their green development. This study incorporates corporate ESG performance and its potential influencing factors into the analysis framework and constructs a theoretical model to capture the relationship between China’s National Demonstration Base policy for Mass Entrepreneurship and Innovation (MEI) and corporate ESG performance, based on the framework that integrates resource enablement, reputation accumulation and information governance. Leveraging the quasi-natural experiment provided by China’s National Demonstration Program for Mass Entrepreneurship and Innovation (MEI), this study systematically evaluates the impact of China’s demonstration policy on corporate ESG performance, drawing on data from A-share listed companies spanning 2010 to 2024. The study finds that the demonstration policy significantly improves enterprise ESG performance, which remains robust after a series of robustness tests. The mechanism test reveals that the policy promotes firms’ green technology innovation by lowering innovation costs, facilitates the accumulation of social reputational capital by incentivizing charitable donations, and compels improvements in information disclosure quality by strengthening market-oriented oversight. Heterogeneity analysis shows that the policy effects are more prominent among heavy polluting industries, large-scale enterprises and firms at the mature stage. Moreover, industry competition intensity and digital transformation have a positive moderating effect on the policy effects. This paper enriches the theoretical dialogue between institutional innovation policy and enterprise sustainable development, providing empirical evidence for the development of a collaborative ESG governance mechanism characterized by an active government and an efficient market.