Is the increasing carbon pressure an incentive or obstacle to corporate creativity? Evidence from Chinese listed firms

Abstract

In the context of addressing climate change, innovation is crucial for fostering low-carbon development. This study examines the relationship between carbon pressure and corporate innovation using a sample of Chinese listed firms. The results show a positive association between carbon pressure and corporate innovation, a relationship that remains robust across various tests. The impact of carbon pressure on corporate innovation is particularly strong in firms with younger executives, executives have financial backgrounds, firms that attract high levels of analyst and media attention, and those in the non-high- and new- technology and manufacturing industries. Additionally, we find that carbon pressure promotes corporate innovation by increasing government innovation subsidies and reducing corporate tax burdens. Furthermore, carbon pressure stimulates corporate green innovation and improves innovation quality. Notably, carbon pressure primarily enhances incremental innovation rather than radical innovation. Confronted with carbon pressure, firms are increasing seeking competitive advantages through innovation activities. This study contributes to the literature on the economic consequences of climate change, and provides deeper insights into the factors influencing corporate innovation. Our findings provide valuable practical insights for managers and policymakers seeking to promote innovation in response to carbon pressure.