Is institutional pressure the mother of green innovation? Examining the moderating effect of absorptive capacity

The excessive consumption of natural resources in industrial development has led scholars to pay increasing attention to firms’ impact on the environment. Faced with considerable environmental pressure, many firms have begun to integrate green innovation into their business strategies. Based on the institutional theory and absorptive capacity perspective, this study examines the role of different institutional pillars on firms’ green innovation decision and further evaluates the interaction effect of absorptive capacity with institutional pillars. Using datasets from listed Chinese companies, this study examines the above hypotheses. As a result, we identify the heterogeneous effect of institutional pressures on green technology innovation and green management innovation and find a significant effect of absorptive capacity on the relationship between institutional pressures and green technology innovation. The conclusion of this study enriches the literature on institutional theory and the absorptive capacity perspective and has implications for firms’ green innovation practices.