Sustainability mission of award: The impact of innovation prize on ESG performance

Traditionally, innovation prizes have been established to catalyze novel technological solutions. If influential awards are bestowed upon organizations contributing to societal and environmental welfare, can this expedite the global mission process of sustainable development? To answer this question, the study elucidates China Patent Award (CPA)'s impact on corporate ESG (Environmental, Social, and Governance) activities drawing on operant conditioning theory (OCT), and explores the underlying mechanisms through resource-based view and signal theory. Empirically, information on more than 6000 award-winning patents is compiled and annotated, matched with the database of publicly listed companies in China, thereby constructing a panel dataset comprising over 1000 companies from 2010 to 2022. Utilizing a counterfactual framework, the study employs difference-in-differences to assess the impact of CPA on corporate ESG performance. The specific results indicate that the CPA has indeed enhanced the ESG scores of awarded firms, primarily due to the effects in increasing corporate revenue and profits (income effect), alleviating financing constraints (financing effect), and stimulating subsequent innovation (technology effect). Moreover, we find that the CPA does not lead to an increase in enterprise's non-operating income and the subsidies received. It also uncovers the heterogeneous impacts of awards on the sub-dimensions of ESG and enterprises with different characteristics. Overall, this study not only underscores the non-monetary incentives of CPA as a nudge in improving ESG performance, but also extends the application of OCT from the micro level to public policy. In so doing, it reconceptualizes award as a strategic asset that communicates a spectrum of positive signals, thereby integrating knowledge from domains of innovation prize, resource and signal theory.