Integrating signaling theory and legitimacy theory, this study aims to explore how and under what conditions environmental, social and governance (ESG) performance influences firms’ overseas research and development (R&D). This critical research question has received limited attention in the literature to date.
We constructed a large dataset based on Chinese listed companies from 2007–2023 to test our theoretical views.
First, ESG performance positively affects firms’ overseas R&D, especially overseas R&D breadth. Second, an ESG performance surplus has a positive effect on moderating the relationship between ESG performance and firms’ overseas R&D. Third, the signaling effect of ESG performance on firms' overseas R&D is weakened when firms experienced environmental violations in the previous period. Fourth, state-owned enterprises (SOEs) have a negative effect on moderating the relationship between ESG performance and firms’ overseas R&D.
First, by positioning ESG performance as a prerequisite for firms' overseas R&D, this study introduces a novel factor into the overseas R&D literature, highlighting the strategic role of ESG performance in cross-border innovation activities. Second, it expands the ESG literature by exploring whether ESG performance functions as a “global language,” influencing corporate decisions regarding the global allocation of innovation resources. This represents a significant step forward, as it reveals the impact of ESG performance on firms' overseas R&D. Finally, by examining the moderating role of the organizational signaling environment, this study provides a more nuanced understanding of the boundary conditions under which ESG performance influences overseas R&D. In doing so, it also broadens the scope of signaling theory, enhancing its explanatory and predictive power, particularly in the realm of overseas R&D.
