How Directors with Green Backgrounds Drive Corporate Green Innovation: Evidence from China

Abstract

Green innovation is a key driver of sustainable development, yet Chinese firms, as major innovators, still underperform in this area. While directors play a central role in corporate governance, the influence of their green backgrounds on green innovation remains underexplored. This study investigates how directors with green backgrounds impact corporate green innovation. We consider both the appointment and the power of green-background directors. At the same time, we use the manually collected data from China’s heavily polluting listed firms between 2014 and 2020. We also conduct regulatory effect and mediation effect analyses. We found the following: (1) Green-background directors significantly promote corporate green innovation. Appointing directors with environmental expertise enhances firms’ green innovation performance, and this positive effect strengthens as these directors’ power increases. (2) Mechanistically, green-background directors facilitate green innovation by raising firms’ environmental awareness and helping secure government environmental subsidies. (3) Contextual influences matter. Moderating effect tests reveal that the impact of green-background directors is strengthened in firms with diligent boards, firm size, and green investors, but weakened in regions with higher marketization levels. (4) Further analysis shows that green-background directors enhance both strategic and substantive green innovation while also ensuring the long-term continuity of green innovation efforts.

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