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Formal institutions, informal institutions, and firms' environmental innovation: An application of the fuzzy set qualitative comparative analysis method

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  • Zhongju Liao
  • Yuhan Wu

Abstract

The institutional environment is an important component of the business environment, and it has a significant impact on firms' strategic decision‐making. Based on institutional theory, this study explores the specific paths by which four types of formal institutions, and two types of informal institutions, jointly affect firms' environmental innovation. Thirty provinces in China were selected as the research sample, and the fuzzy set qualitative comparative analysis method was used to analyze the data. The results indicate four paths of high‐level environmental innovation and two paths of non‐high‐level environmental innovation in institutional combinations. Based on the core conditions of each path, the results can be divided into five types of institutional combinations; formal institutions are found to play an irreplaceable role in the overall institutional environment. The study findings provide a reference for the government to optimize formal and informal institutions to promote firms' environmental innovation.

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  • Zhongju Liao & Yuhan Wu, 2025. "Formal institutions, informal institutions, and firms' environmental innovation: An application of the fuzzy set qualitative comparative analysis method," Sustainable Development, John Wiley & Sons, Ltd., vol. 33(1), pages 668-680, February.
    • Handle: RePEc:wly:sustdv:v:33:y:2025:i:1:p:668-680
    DOI: 10.1002/sd.3151
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