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<p>As ESG performance gains traction in environmental policy agendas, its effectiveness in driving firm-level environmental innovation (EI) remains contingent on internal governance structures. This study investigates how governance entrenchment influences the ESG and EI relationship, using latest panel data from Chinese A-share listed firms (2015–2024). We focus on two dimensions: managerial entitlement and directorial strongholds, which represent contrasting forms of internal power entrenchment. Our findings reveal that ESG performance is positively associated with both invention-type and utility-type EI. This linkage is further amplified under stronger managerial entitlement, which reflects enhanced strategic alignment and executive commitment to sustainability. However, entrenched boards attenuate this effect, likely due to rigidity and self-preservation. A further heterogeneity analysis based on echelon duality (CEO vs Chair role separation) illustrates how leadership structures shape the institutional effectiveness of ESG strategies. This research contributes to stakeholder theory and entrenchment theory by emphasizing the importance of internal governance in fostering innovation-driven environmental performance in emerging market contexts.</p>

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Governance entrenchment and ESG effectiveness in driving environmental innovation: new evidence from China

  • 期刊论文

  • 发表日期：

    2026年5月12日

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  • Shanshan Yue,
  • Cong Chang,
  • Rui Ding,
  • Husni Samara

摘要

As ESG performance gains traction in environmental policy agendas, its effectiveness in driving firm-level environmental innovation (EI) remains contingent on internal governance structures. This study investigates how governance entrenchment influences the ESG and EI relationship, using latest panel data from Chinese A-share listed firms (2015–2024). We focus on two dimensions: managerial entitlement and directorial strongholds, which represent contrasting forms of internal power entrenchment. Our findings reveal that ESG performance is positively associated with both invention-type and utility-type EI. This linkage is further amplified under stronger managerial entitlement, which reflects enhanced strategic alignment and executive commitment to sustainability. However, entrenched boards attenuate this effect, likely due to rigidity and self-preservation. A further heterogeneity analysis based on echelon duality (CEO vs Chair role separation) illustrates how leadership structures shape the institutional effectiveness of ESG strategies. This research contributes to stakeholder theory and entrenchment theory by emphasizing the importance of internal governance in fostering innovation-driven environmental performance in emerging market contexts.