The Effect of Governance Structure on Green Technology Innovation: Based on the Internal Control Perspective

Abstract

In the context of escalating environmental challenges and the imperative for sustainable economic transformation, corporate governance has emerged as a pivotal determinant of green technological innovation (GTI). This study empirically examines the nexus between the governance structure (GS) and GTI within China's manufacturing sector, leveraging an extensive dataset spanning 2011–2021. Through fixed-effects estimation and intermediary effect modelling, the analysis reveals that a well-structured GS significantly enhances firms' capacity for technological advancement in sustainability-oriented innovation. Specifically, the regression results indicate that a one-unit increase in corporate governance quality (CorpGov) is associated with a 0.249 increase in GTI (Lnpatent) at the 1% confidence level, affirming the substantial role of governance reforms in driving sustainable innovation. A key contribution of this study lies in unveiling the mediating role of internal control, which channels the governance–innovation link by fostering strategic discipline, mitigating risk aversion, and optimizing resource allocation. The results show that internal control quality (CI) increases by 12.183 for each unit improvement in CorpGov (p < 0.01), and subsequently, CI positively affects GTI, reinforcing its critical function in the innovation mechanism. Furthermore, heterogeneity analysis indicates that governance reforms exert a disproportionately stronger influence on private enterprises (β = 0.312, p < 0.01) than on state-owned enterprises (insignificant effect) and firms in China's western regions (β = 0.411, p < 0.01) compared with those in the eastern (β = 0.229) and central (β = 0.274) regions. These findings underscore the role of institutional and regional disparities in shaping the effectiveness of governance-driven innovation. By integrating governance mechanisms, internal control efficacy and innovation strategy into a unified empirical framework, this research advances the theoretical discourse on corporate sustainability governance. The findings underscore the necessity for governance-driven policy interventions aimed at fostering innovation-led environmental sustainability, particularly in economies navigating the transition from regulatory compliance to market-driven green investment.