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ISO 14001 Certification and Corporate Technological Innovation: Evidence from Chinese Firms

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Abstract

While a growing body of literature has examined the link between green activities and firm innovation, little attention has been paid to the underlying mechanisms through which green activities take effect. This paper leverages the context of ISO 14001 certification among Chinese listed firms to investigate how the certification of environmental management system (EMS) to ISO 14001 shapes corporate technological innovation. Drawing from the resource-based view and the resource management perspective, we argue that EMS certification to ISO 14001 facilitates corporate technological innovation through the mediating effects of firms’ internal resource management practices, namely resource utilization, resource accumulation, and resource allocation. A difference-in-differences research design, together with the propensity score matching approach and the instrumental variable technique, provides corroborating evidence for our predictions. The current research not only makes substantial contributions to the literature, but also provides important ethical implications for both policymakers and firm managers.

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Notes

  1. This was part of a larger patent database construction project for all Chinese listed firms. An extended report on this project is available upon request.

  2. According to China’s Patent Law, it takes 18 months from the patent filing date to its disclosure date. Therefore, by the time of the current research, patents that were filed in 2015 or 2016 might not be disclosed, which leads to a serious truncation problem.

  3. Firms that have not filed any patents during the sample period are automatically dropped out in the regression process.

  4. We aggregate the facility-level ISO 14001 certification up to the firm level, meaning that when (any) one of the focal listed firms’ facilities certified with the ISO 14001 standard, our independent variable takes the value of 1, and 0 otherwise.

  5. As a robustness test, we also aggregate the amount of investments in such long-term oriented activities and calculate its ratio to total sales of the focal firm in a given year. The regression results are qualitatively consistent with those of the count variable and are available upon request.

  6. As stated above in Variables and Measures section, relevant time-variant industry effects, i.e. industry-level characteristics of innovation/patenting activities, are controlled by two particular variables in the empirical models.

  7. Ratio of mediating effect to total effect = a * b/(a * b + c′), where c′ is the estimated coefficient on the independent variable (i.e. ISO 14001 certification) from the bootstrapping of the third step.

  8. Note that Eq. (1) is not estimated by the simultaneous equation approach. As explained above, the first step in the traditional Baron and Kenny’s approach is not necessary for mediation to occur.

  9. The estimation steps of this approach can be found at http://www.ats.ucla.edu/stat/stata/faq/mulmediation.htm. See Agarwal et al. (2016) for a recent application in management.

  10. Due to limited space, the results of the first-step probit regression are omitted here, but are available upon request.

Abbreviations

CMV:

Common method variance

CSR:

Corporate social responsibility

DID:

Difference-in-differences

EMS:

Environmental management system

HHI:

Herfindahl–Hirschman index

ISO:

International Standardization Organization

PDCA:

Plan-Do-Check-Act

PSM:

Propensity score matching

RBV:

Resource-based view

SIPO:

State Intellectual Property Office

SOE:

State-owned enterprises

VIF:

Variance inflation factor

2SLS:

Two-stage least square

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Acknowledgements

We are grateful to Tony Tong (University of Colorado at Boulder), Jiangyong Lu (Peking University), and seminar participants at 2017 AOM and Peking University for helpful comments. This research was supported by the National Natural Science Foundation of China (Nos. 71702031, 71772038) and by the Foundation of Humanities and Social Sciences of the Ministry of Education in China (No. 17YJC630038).

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  1. Business School, University of International Business and Economics, No. 10 Huixing Dongjie, Chaoyang District, Beijing, 100029, China

    Wenlong He

  2. Guanghua School of Management, Peking University, No. 5 Yiheyuan Road, Haidian District, Beijing, 100871, China

    Rui Shen

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  1. Wenlong He
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Wenlong He has received research grants from the National Natural Science Foundation of China (Nos. 71702031, 71772038). Wenlong He and Rui Shen declare that they have no conflict of interest.

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He, W., Shen, R. ISO 14001 Certification and Corporate Technological Innovation: Evidence from Chinese Firms. J Bus Ethics 158, 97–117 (2019). https://doi.org/10.1007/s10551-017-3712-2

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