Positive Externality: Uncovering the Family Motivation of Green Innovation in Family Business

Abstract

Against the backdrop of the prevailing ESG trend, the imperative for green innovation has become increasingly salient, functioning as a critical strategy for enterprises to address environmental regulatory pressures. From the perspective of externalities, this study empirically examines the impact of controlling families on green innovation. Utilizing data from Chinese listed family firms spanning 2016 to 2020, the research finds that the positive externalities associated with green innovation exacerbate family firms’ perceptions of risk and loss. Furthermore, there exists a negative correlation between family ownership and green innovation. This relationship is reinforced by the involvement of family executives but alleviated by the presence of state ownership. This study clarifies the influence of positive externalities on green innovation in Chinese family firms, as well as two distinct forces that amplify and attenuate this externality effect. JEL Classification: D22, Q55, D19.