The Effects of Board Capital on Green Innovation to Improve Green Total Factor Productivity

Abstract

The economy’s improvement through industrial success is also leading to environmental problems such as the production of greenhouse gases and other chemicals. Since global warming has caught the attention of researchers and authorities, environmental issues are receiving more attention. In this vein, the pressure of sustainable development goals explains the status of corporate sustainable development. Particularly, corporate green practices including green innovation and green total factor productivity have become hot topics. Therefore, how green innovation can be beneficial to green total factor productivity is a major point of concern in this study. For that, corporate factors such as the role of board capital are a new light for developing green innovation. Moreover, this study also takes the competition factor into account for green innovation. This study considers agency theory and the Porter hypothesis as the theoretical base, and the results give distinctive conclusions by using fixed effects, generalized moments methods, and feasible generalized least squares on Chinese manufacturing corporations from 2011 to 2020. After a series of tests, we highlight the benefits of board capital, particularly human capital and social capital, that help to produce firm green innovation. Additionally, we explain that market competition compels corporations to make green innovations. Further, we importantly show that market competitiveness plays a critical role in fostering relationships between green innovation and board capital. It is crucial to note that by enhancing green innovation, the goal of green total factor production can be reached. These findings shed light on the imperative environmental concerns and can be a good example for authorities and governments.