Drawing on the behavioral theory of the firm, this study aims to investigate how positive performance feedback (PPF) influences both the quantity and quality of green innovation and develop a motivational conflict framework to explain this relationship.
Using a sample of 25,446 firm-year observations from 3,397 listed manufacturing firms in China, this study employs ordinary least squares regression with year and industry fixed effects to test the hypotheses. A series of endogeneity and robustness tests are also conducted.
The results reveal that PPF leads firms to prioritize the quantity of green innovation (TGI) over their quality (LGI), resulting in incremental reduction of LGI. Furthermore, we find that performance-oriented institutional investors strengthen this bias, whereas green-oriented institutional investors mitigate it. In terms of underlying mechanisms, PPF appears to trigger this trade-off by heightening managerial myopia, which fosters TGI, while simultaneously dampening managerial risk-taking, which constrains LGI. Finally, the evidence on economic consequences suggests that TGI is primarily linked to short-term financial performance, whereas LGI underpin long-term value creation.
This study advances the literature by elucidating the intrinsic motivational mechanisms that underpin high-performing firms’ strategic choices between different types of green innovation (TGI vs LGI). It also provides actionable implications for policymakers and other stakeholders seeking to more effectively regulate corporate green conduct and to promote substantive, innovation-driven environmental transformation.
