The Cost of Conflict: Inter-State Tensions and Corporate Green Innovation

54 Pages Posted: 22 Oct 2024

See all articles by Dongmin Kong

Dongmin Kong

School of Economics, Huazhong University of Science and Technology

Mengxu Xiong

Huazhong University of Science and Technology

Abstract

Based on the real-time conflict data between China and the world and the bilateral trade records, we construct an index that measures the influence of geopolitical clashes on firms. Using the novel index, our study reveals a detrimental effect of inter-state tensions on corporate green innovation, which is conceivably led by tougher financing conditions, weakened institutional pressure, and firms’ prudency in green investment. The findings are valid under various robustness examinations and endogeneity tests. Evidence from our heterogeneity analyses suggests that the adverse effect is more pronounced for non-politically connected firms, financially constrained firms, firms with lower CSR scores, firms located in less environmentally-conscious provinces, and firms importing more intermediate goods. We enhance the comprehension on firm green practices in the context of fractured and fragile global relations, and offer implications for scholars seeking to investigate the consequences of international adverse events from the microscopic firm perspective.

Keywords: inter-state tensions, Goldstein score, China, green innovation

Suggested Citation

Kong, Dongmin and Xiong, Mengxu, The Cost of Conflict: Inter-State Tensions and Corporate Green Innovation. Available at SSRN: https://ssrn.com/abstract=4995591 or http://dx.doi.org/10.2139/ssrn.4995591

Dongmin Kong (Contact Author)

School of Economics, Huazhong University of Science and Technology ( email )

Bldg. of Econ. School, Louyu Rd. 1037#
HUST, Hongshan Dist.
Wuhan, Hubei 430074
China

Mengxu Xiong

Huazhong University of Science and Technology ( email )

1037 Luoyu Rd
Wuhan, 430074
China

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