Corporate “Greening” and Innovation: A Reinterpretation Based on Historical Immortals

ABSTRACT We distinguish and explore how two distinct types of green externalities—the Porter hypothesis (PH) effect and the greenwashing effect—would interact with corruption‐induced rent‐seeking effect to shape corporate innovation, based on negative binomial models fitted on 22,589 observations. Having first established a positive contemporaneous association between greenwashing and innovation, we invoke path dependence by instrumenting corporate greenwashing with geographical proximity measures derived from the cultural origins of 321 historical “nature‐integrated” immortals. Likewise, we use historical cronyism networks to instrument corporate rent seeking. We identify a novel positive greenwashing externality, alongside the conventional PH effect and the rent‐seeking effect. This suggests that perceived “greenwashing” may actually reflect corporate green championing behaviors in China, significantly influenced by local sociocultural factors. However, the interaction between the two green externalities and the rent‐seeking effect is negative, indicating that high rent‐seeking intensity may dampen the positive induced innovation effects.