4.2.2. The Moderating Effect of Institutional Environment and Redundant Organizational Resources

Table 5 shows the moderating effects of the institutional environment and redundant organizational resources. H2 predicted that the institutional environment would strengthen the positive relationship between ESG ratings and corporate green innovation. From model 1 in Table 5, it can be seen that the interaction term between ESG ratings and the institutional environment had a significant correlation with corporate green innovation (coef. = 0.009, *p* < 0.01). The institutional environment strengthened the positive relationship between ESG ratings and corporate green innovation. Therefore, H2 is partially supported.

H3 predicted that redundant organizational resources would strengthen the positive relationship between ESG ratings and green innovation. Model 2 in Table 5 shows that the interaction term between ESG ratings and redundant organizational resources had a significant positive correlation with the share of corporate green innovation (coef. = 0.067, *p* < 0.05), demonstrating that redundant organizational resources strengthened the positive relationship between ESG ratings and corporate green innovation. Therefore, H3 is supported. In addition, Model 3 in Table 5 demonstrates that the aforementioned two moderating factors were included in the integration model for the regression test, and the results indicate the validity of the conclusions.

**Table 5.** The moderating effects of the institutional environment and redundant organizational resources.



**Table 5.** *Cont.*

Notes: \*\*\* correlation is significant at 1%. \*\* correlation is significant at 5%. \* correlation is significant at 10%. t-statistics in parentheses.

#### *4.3. Robustness Test*

#### 4.3.1. The Change of the Measurement Method of Corporate Green Innovation

This paper adopted various green innovation variables to test robustness. Specifically, we classified the application of green innovation patents as exploratory green innovation (GRinva) and the application of utility patents as exploitative green innovation (GRuma). Table 6 indicates the robustness of this paper concluded from the regression results similar to those described in previous sections.

**Table 6.** Substitute variables for corporate green innovation.



Notes: \*\*\* correlation is significant at 1%. \*\* correlation is significant at 5%. t-statistics in parentheses.

4.3.2. The Change of the Measurement Method of Standard Errors

This paper has referred to existing research methods. This paper employed Driscoll– Kraay standard errors to estimate the standard errors to remove the possible heteroscedasticity [76], cross-sectional correlation, and sequence correlation of panel data, with the regression results shown in Table 7. The study found that the research hypotheses were still tenable with a high validity performance upon replacing the regression standard error calculation method.

**Table 7.** The change of the measurement method of standard errors.



**Table 7.** *Cont.*

Notes: \*\*\* correlation is significant at 1%. \*\* correlation is significant at 5%. \* correlation is significant at 10%. t-statistics in parentheses.

#### **5. Conclusions and Discussion**

#### *5.1. Conclusions*

Public awareness of sustainable development worldwide has focused attention on green innovation. This green innovation trend may reshape the competitive advantages of enterprises and have a profound impact on their green transformation and development. Therefore, this paper believes that the specific advantages of pursuing inclusive social development with ESG as the core will become particularly significant in green innovation strategies in comparison with the traditional pursuits of private profits. Based on the panel data of China's A-share listed companies from 2009 to 2020, this paper employed the fixed effect model to empirically analyze the relationship between the ESG ratings of the sample enterprises and the green innovation performances of the enterprises and further tested the regulatory effects of the external institutional environment and the redundant resources of the internal organization. The following conclusions were made: (i) ESG ratings significantly promoted green innovation; (ii) the completeness of the institutional environment and the abundance of organizational redundancy strengthened the positive impact of ESG ratings on corporate green innovation. The findings demonstrate that businesses can successfully react to a complex business environment thanks to the strategic flexibility provided by their ESG rating performance. The ESG rating performance, however, can encourage green innovation and enterprise growth through positive spillover channels such as the demonstration effect.

China is at a critical stage of building a green circular development and striving to transform it into a sustainable economic model. Given the important value of ESG ratings in the green innovation of enterprises, accelerating the promotion of ESG governance, optimizing the cultivation of enterprises with ESG advantages, and striving to create new advantages in green competition conform to the internal requirements of the concept of sustainable development and offer a vital opportunity to improve the high-quality green development of the economy. These research findings have the following practical implications.

Members of boards of directors should take the initiative by taking responsibility for environmental preservation and social responsibility while concentrating on corporate governance and non-financial performance in order to maintain sustainable development and a competitive advantage. A high ESG performance also means that the enterprise will have an advantage over its rivals in the market. Board members should focus on improving their ESG performance in order to enhance their corporate green innovation capabilities, attract value investment from investors with an ESG bias, and generate higher market competitiveness. This is due to the ESG performance playing a key role in promoting corporate green innovation. Moreover, board members should take the initiative by assuming environmental protection and social responsibilities, placing emphasis on corporate governance and non-financial performance, performing cognitive modeling of the ESG concept and the allocation of redundant organizational resources to green innovation strategies, and forming a green sustainable development system.

For strategic investors, an enterprise's ESG performance is critical since it somewhat indicates how well-run and innovative the business is. ESG scores are therefore nonfinancial indicators that investors can use to evaluate the worth of a company's investment when choosing investment targets in order to better manage risks and earn matching long-term returns.

As policymakers, the government should focus more attention on the encouragement and promotion of ESG. To further encourage businesses to adopt sound ESG ideas and advance the development of their environmental, social, and corporate governance capabilities, the government and pertinent ministries should release related policies and privileged regulations, which are beneficial for improving the regional institutional environment and promoting the development of corporate green innovation.

From a national standpoint, the introduction of a system of rewards and punishments for corporate ESG performance should be encouraged. Through a variety of incentives, including tax rebates, green credit incentives, and lowered entry barriers, the government can encourage businesses to enhance their ESG performance and advance sustainable socio-economic growth. The government should actively recognize the stimulating impact of government subsidies on green innovation and provide incentives to creative businesses. In order to encourage green innovation, the government should aggressively recognize the role that subsidies play in the process and provide financial support to forward-thinking businesses.
