Busting the ‘Princeling’? Demystifying the Effect of Corporate Depoliticization on Green Innovation: The Moderating Effect of Politician Turnover

Abstract

China’s anticorruption efforts and depoliticized provisions trigger government officials to resign from firms, terminating corporate political connections established through managers. This paper addresses corporate depoliticization and its effect on firms’ green strategies. We disentangled how and why depoliticized firms actively take on green innovation and the moderating effect of politician turnover on the above relationship. This paper utilized the data related to China’s privately operated firms from 2008 to 2017 to test its hypothesis. Using the methods of propensity score matching (PSM) and difference-in-difference (DID) to mitigate endogeneity issues, the results indicate that (1) corporate depoliticization can foster green innovation; (2) the exploration of the boundary condition of politician turnover shows that the positive relationship between corporate depoliticization and green innovation is enhanced when depoliticized firms have experienced the changes of government officials; (3) anticorruption shocks can significantly and positively affect green innovation when interacted with a firm with depoliticization. These findings enrich corporate depoliticization and green innovation research.