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<p>This paper examines whether ESG (Environmental, Social, and Governance) serves as a strategic instrument for competitive advantage in market competition from the perspective of resource allocation. Using China's Negative List System of Market Access (NLSMA), implemented since 2016, as an exogenous shock to intensify market competition, the study employs a multi-period difference-in-differences (DID) model to analyze its impact on corporate ESG performance. The results show that market competition significantly reduces ESG performance, as firms reallocate resources to other competitive approaches, including asset expenditure, advertising, R&amp;D, and labor hiring. This effect is more pronounced when firms are&#xa0;non-polluting, face&#xa0;lower product market competition,&#xa0;have higher financial constraints, and&#xa0;exhibit lower investment efficiency. Additionally, the decline in ESG performance under market competition weakens product market competitiveness while increasing firm value and risk. These findings suggest that ESG is not a preferred competitive instrument for firms, providing a more comprehensive understanding of its role in market competition.</p>

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Market competition, resource allocation and corporate ESG performance

  • 期刊论文

  • 发表日期：

    2025年6月23日

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  • Changqing Li,
  • Yu Li

摘要

This paper examines whether ESG (Environmental, Social, and Governance) serves as a strategic instrument for competitive advantage in market competition from the perspective of resource allocation. Using China's Negative List System of Market Access (NLSMA), implemented since 2016, as an exogenous shock to intensify market competition, the study employs a multi-period difference-in-differences (DID) model to analyze its impact on corporate ESG performance. The results show that market competition significantly reduces ESG performance, as firms reallocate resources to other competitive approaches, including asset expenditure, advertising, R&D, and labor hiring. This effect is more pronounced when firms are non-polluting, face lower product market competition, have higher financial constraints, and exhibit lower investment efficiency. Additionally, the decline in ESG performance under market competition weakens product market competitiveness while increasing firm value and risk. These findings suggest that ESG is not a preferred competitive instrument for firms, providing a more comprehensive understanding of its role in market competition.