1. Introduction
At the 75th session of the United Nations General Assembly in September 2020, the Chinese government committed itself to peak carbon emissions by 2030 and to achieve carbon neutrality by 2060 [
1]. Enterprises are the main actors in green governance, playing a key role in achieving peak carbon and carbon-neutral targets. China is in a new normal phase, committed to the green transformation of its energy system to reduce heavy pollution [
2]. With the implementation of a series of environmental regulation policies and the increased importance society attaches to sustainable development, green innovation is gaining attention from the government, enterprises, and the market. As a means to achieve sustainable development, green innovation is considered conducive to a win-win situation of economic growth and environmental protection [
3]. Regulating and guiding enterprises toward cleaner production has become an important way to promote green development. Enterprises face high costs in transitioning and upgrading to cleaner directions, so they find it challenging to meet the needs of green development. Therefore, exploring the optimal development of green innovation has become essential in deepening sustainable goals.
With the implementation of a series of environmental regulation policies and the improvement of society’s attention to sustainable development, green innovation has been gradually more valued by the government, enterprises, and the market [
4]. Green innovation refers to new or improved products, processes, technology, or practice innovations that mitigate environmental damage [
5], and focus on and achieve innovative models of environmental sustainability [
6]. At the same time, based on the upper echelons theory, it is believed that executive characteristic factors tend to influence the strategic decisions of corporates, which means that the influence of executive characteristics on corporate strategy has become an important focus of academic attention. Prior research has conducted a series of discussions on the antecedents of green innovation, including technological capabilities [
7], environmental regulations [
8], green knowledge sharing [
9], consumer pressure [
10], and market demand [
11]. However, existing studies are less likely to explore the impact of green innovation from the perspective of executive characteristics. Recent upper echelons theory points out that executives with long experience in a field may develop selective cognition and consider decisions based on cognitive preferences from long prior experience [
12]. Executives inject much of their personality, experiences, and values into their behavior. This degree of individualization can determine the formation of strategy or the actions of others, and the organization becomes a reflection of the executives [
13]. These characteristics shape the cognitive structure of the enterprise and thus affect the green innovation of enterprises [
14]. Executives’ reactions to environmental changes as strategic decision-makers in their firms are influenced by their perceptions of environmental issues. If executives view environmental issues as opportunities for corporate growth, they choose forward-looking environmental strategies, which enhance corporate environmental performance [
15]. Therefore, this study focuses on an essential but understudied executive characteristic: environmental protection background. This characteristic represents the individual’s experience and background in environmental protection. It is unclear whether and how the environmental protection background of executives influences green innovation, and this study aims to fill this gap. Therefore, the motivation of this study is mainly to explore the relationship between an executive’s environmental protection background and corporate green innovation and its boundary conditions.
Further to this, an executive’s environmental protection background is internalized in the enterprise’s strategic decisions, leading the corporate to protect the environment and demonstrate to the outside world that the enterprise is committed to environmental causes. Existing research assumes that the interests of the firm and the managers are perfectly aligned and therefore managers will follow the development of the firm and take the necessary actions for the firm to achieve its goals. However, agency theory emphasizes that there is an inherent conflict of interest in the agency–principal relationship and therefore the need for proper governance [
16]. Thus, corporate oversight mechanisms also play a crucial role in aligning the interests of managers and shareholders. Given that media coverage and board independence are two key oversight mechanisms, we explore how they shape the impact of executives’ environmental backgrounds on green innovation strategies. On the one hand, media coverage is recognized as an essential monitoring mechanism, as it can act as a watchdog and motivate corporates to work in the interests of shareholders [
17]. This is because the media is used as an important tool for external stakeholders to evaluate managers [
18]. Stakeholders will not only think that the evaluation role of the media is legitimate, but also use it trigger their actions against companies with poor performance and thus affect managers’ capital [
19]. On the other hand, the board of directors has been recognized as the primary internal oversight force [
20]. Independent directors are more likely to punish managers than inside directors because they “have the incentive to build a reputation as experts in decision control” [
21]. However, there is little literature on these topics. This study integrates the upper echelons theory and agency theory, collects data on the executive profiles of the Chinese-listed companies from 2007 to 2021, and uses textual-mining analysis to combine panel data to investigate the impact of executive environmental background on green innovation.
The contributions of this study are: First, this study adds value to the literature on upper echelons theory and green innovation research. Differing from previous studies that only focus on the influence of executives’ overseas experience, educational background, and functional background on corporate green strategic behavior, this study incorporates executives’ environmental background as an occupational background experience into the upper echelons theory, explores the relationship between executives with environmental background and green innovation, and further improves the research content of the upper echelons theory from a green innovation perspective, thereby making a new contribution to the upper echelons theory of Hambrick and Mason (1984) [
22], as the contributions to this area of the literature in the field of green innovation are few, with some very recent exceptions. This study’s framework and insights can help upper echelons theory scholars to understand the environmental context of executives as a tool to understand their green innovation strategies. This study analyzes the influence of executives with environmental protection background on the green innovation strategy from the perspective of their power structure and advances the traditional external incentive determinism of green development to the level of enterprises’ independent incentive, which provides a development direction for further improving the incentive path of green development, realizing green transformation, and upgrading. Second, from the perspective of green innovation and based on agency theory, this study explores how the impact of the environmental protection background of senior executives on green innovation depends on media coverage and the independence of the board of directors. The findings of this study on the relative importance of executives’ environmental protection backgrounds in green innovation also represent an important development in the study of upper echelons theory and agency theory, as executives’ understanding of how firms reallocate resources and capabilities in the face of internal and external supervisory role, enriching the literature on how executive background characteristics influence how firms adjust their strategic choices to accommodate corporate green growth.
5. Conclusions and Discussion
As the main actors of environmental protection and green governance at the micro level, corporates play a crucial role in achieving sustainability goals. Based on the upper echelons theory, it is believed that executives from environmental protection backgrounds tend to integrate previous “green” cognitive experience into decision-making behavior, ensuring the improvement of their environmental and economic performance. This study focuses on whether listed companies employing executives with environmental protection backgrounds can promote green innovation and its boundary conditions. The study finds that executives with environmental protection backgrounds enhance green innovation. The positive relationship remains robust when instrumental variables and a series of robustness tests address the endogeneity issue. Further, the positive relationship between executives’ environmental protection background and green innovation is strengthened when media attention and board independence are greater. The findings provide insights into the view that executive characteristics impact green innovation.
This study extends the literature on the governance effects of management characteristics and provides new empirical evidence for the study of green innovation. First, this study adds value to the literature on upper echelons theory and green innovation research. Prior research on the effects of executive characteristics on green innovation has focused on the effects of characteristics such as executive compensation, educational background, overseas experience, and executive tenure [
5]. However, few studies have put the perspective of the executive’s environmental protection background affecting green innovation. Therefore, this study extends the executive’s environmental protection background to the field of green innovation research based on upper echelons theory. Second, it adds to the work of Khanra et al. (2022) [
27] who examined the strategic management actions taken by executives in introducing green innovation initiatives, further adding to this literature by focusing on how the executive’s environmental protection background influences the boundary mechanisms of green innovation. While previous research has focused on the direct effects of executive characteristics on various strategic choices of firms, scholars have recently called for further exploration of factors that mitigate or enhance these effects [
6]. Based on insights from agency theory, this study examines the moderating role of media attention and board independence. This study also supplements the previous interpretation of agency theory and introduces the role of internal and external supervision mechanism [
68]. This study extends the view that integrating agency theory and upper echelons theory enriches understanding of the governance functions of these two supervisory mechanisms in the executive’s environmental protection background.
6. Recommendation
To enhance corporate green governance and sustainable development, it is important to leverage the governance strengths of executives and add an “environmental barrier” to corporate business decisions. The government should guide companies to set scientific standards for executive staffing and hire executives who value corporate environmental governance, so that business development can balance financial performance with environmental performance. In addition, executives with environmental protection backgrounds should be given the same rights as their positions to ensure they have a sufficient voice in corporate decision-making to promote sustainable development. Based on the research findings, several practical recommendations are made for governments and corporates.
For the government, it must increase its policy support to encourage corporates to implement green innovation. As a way for corporates to take up social and environmental responsibility, green innovation goals are not only based on the realization of their economic benefits, but also take into account the embodiment of social responsibility, urging enterprises to improve environmental performance and enhance green innovation. The government should build a perfect green innovation system, actively guide the flow of green funds to corporates, and prompt them to eliminate their backward production methods to promote environmental protection and sustainable development of the economy. For example, in the context of low-carbon development, the government should introduce policies and measures to promote green innovation to ensure resource efficiency. It could establish a special fund for corporate green finance or credit. It should follow the principle of differentiation and formulate targeted preferential policies, according to the actual situation of corporates, to support the deep integration of green products, organizational structures, and management processes.
For corporates, it is important to emphasize the role of the environmental protection background of executives in enhancing green innovation. First, boards must consider this characteristic when selecting executives and ensuring that their decisions are consistent with corporate goals. For example, suppose corporates are under pressure for environmental legitimacy (e.g., corporate pollution). In that case, executives with environmental protection backgrounds may be an effective way to make the necessary strategic changes [
48]. Executives with an environmental protection background are beneficial from an environmental protection perspective, especially in the context of green innovation, an area considered important for corporate strategy. Hiring executives with environmental protection backgrounds in listed companies helps to encourage green investors to invest in such companies. As the number of executives with environmental protection backgrounds increases, their contribution to green innovation becomes more evident. Therefore, corporates should improve their governance mechanisms. Including executives with environmental protection backgrounds in corporate management can improve management diversity, thus reducing the myopia of management and facilitating the management to make green innovation decisions.
Second, in the era of big data, corporates should promote information dissemination and corporate governance through the media, so that stakeholders can better understand the corporate and improve its information transparency. Corporates should raise the environmental protection awareness of their executives and be more active in disclosing green innovation information. This can alleviate the information asymmetry between enterprises and stakeholders and compensate for the lack of contrast resulting from high stakeholder expectations. Corporates can gain the trust and support of stakeholders, thus promoting green innovation. Corporates should promote information dissemination and corporate governance through the media so that stakeholders can improve the transparency of information and social responsibility of corporates.
Third, since the higher the proportion of independent directors, the easier it is for executives with environmental protection backgrounds to play a role and thus promote green innovation, it is necessary to improve the corporate governance mechanism and improve the supervision mechanism on executives’ decision-making process, which can be achieved through measures such as increasing the proportion of independent directors and designing an investment risk-sharing mechanism.