Previous studies have focused on the financial effects of environmental, social and governance (ESG) practices but have overlooked non-financial aspects. This study aims to address this gap for the construction industry, with its resource and labour dependence, diverse stakeholders and complex governance. It examines ESG effects on Chinese construction enterprises' competitive advantage (CA) from financial and non-financial perspectives and explores innovation's mediating role under environmental uncertainty (EU).
Through structural equation modelling and regression analysis, this study examines ESG effects on CA and their mediators. Data are collected through a survey of Chinese construction enterprises.
(1) The environmental dimension and governance dimension enhance CA, whereas the social dimension has no significant effect. (2) Enterprise innovation mediates this relationship, with business model innovation (BI) and technological innovation (TI) playing distinct roles. (3) EU negatively moderates innovation's effect on CA.
This study expands the theoretical framework by integrating non-financial aspects into ESG's effect on CA. The findings offer insights into how ESG fosters CA through innovation, with distinct roles for the ESG dimensions and emphasise the need for adaptive innovation strategies in uncertain environments.
