Top‐management compensation and environmental innovation strategy

The increasing awareness of global climate change puts more pressure on firms to reduce their environmental externalities. Managers long ignored this responsibility, which may erode business profits, going against their traditional goals. In this study, we examine the effect of top management's...

Full description

Saved in:
Bibliographic Details
Published in:Business strategy and the environment 2023-05, Vol.32 (4), p.1634-1649
Main Authors: Phung, Giang, Trinh, Hai Hong, Nguyen, Tam Huy, Trinh, Vu Quang
Format: Article
Language:English
Subjects:
Climate change
Companies
Compensation
eco‐innovation
Environmental management
environmental policy
Global climate
Incentives
Innovations
Motivation
Paris Agreement
Profits
Top management
top‐management compensation
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:The increasing awareness of global climate change puts more pressure on firms to reduce their environmental externalities. Managers long ignored this responsibility, which may erode business profits, going against their traditional goals. In this study, we examine the effect of top management's extrinsic incentives (i.e., reward‐driven motivation) on corporate environmental innovation strategy (i.e., eco‐innovation) using a large dataset of S&P1500 non‐financial firms for 2000–2020. The results indicate that firms with greater levels of top‐management compensation exhibit higher scores of eco‐innovation engagement. The effect holds after we address the endogeneity problem through the quasi‐natural experiment using the difference‐in‐differences analysis on the event of the Paris Agreement 2015. Our further investigations reveal that such a positive impact of managerial incentives on eco‐innovation is less intensified in the more polluting industries but more pronounced in more innovative ones.
ISSN:0964-4733
1099-0836
DOI:10.1002/bse.3209