Intergenerational externalities and corporate green innovation

Abstract Based on the intergenerational externalities views, this paper builds the link between ecological damage claim policy and firms' green innovation. Making polluters bear intergenerational responsibility is considered to be a key move to break intergenerational externalities and effectively address the problem of multiple environmental failures. The ecological damage claim policy makes the environmental rights of future generations being remedied through judicial procedures, and can clarify pollution responsibility to push firms to choose long‐term environmental solutions for achieving intergenerational sustainability and maintaining intergenerational justice. Using longitudinal data (2012–2017) covering 4992 Chinese firm‐year observations in high‐pollution industries, we find that ecological damage claim policy promotes firms' green innovation. This positive effect is stronger when the firm is located in a region with stronger environmental enforcement and more environmental organizations.