The Impact of Firm-Level Political Risk on Eco-Innovation: The Moderating Effect of CEO Power

Abstract

This study examines the impact of firm-level political risk on eco-innovation at the firm level, particularly emphasizing the moderating role of CEO power in this relationship. Using a dataset from 33 countries from 2006 to 2022, we employ two-step dynamic panel data estimations to address endogeneity concerns. The findings highlight a positive impact of political risk on eco-innovation, which is further strengthened in the presence of a powerful CEO. This evidence implies that effective leadership from CEOs can assist firms in navigating political risks and advancing sustainable initiatives. The results remain robust across various specifications, including alternative measurements for firm-level political risk. The study highlights the crucial role of CEOs in managing political risks and facilitating eco-innovative practices within firms.