Green innovation, ESG governance, and digital transformation: Evidence from China's high-end manufacturing sector

Abstract

Research background: Green technological innovation (GTI) is widely regarded as a pathway to reducing corporate carbon emissions; however, its effectiveness remains contested because of rebound effects, governance gaps, and complexities in the digital era. Although existing studies highlight the role of innovation, few investigate how ESG governance and digital transformation (DT) jointly influence firm-level carbon outcomes, particularly in emerging economies.

Purpose of the article: This study investigates how GTI, ESG performance, and DT interact to influence firm-level carbon emission intensity in China’s high-end equipment manufacturing sector. The study examines the mediating and moderating mechanisms that determine whether innovation generates sustainable environmental outcomes.

Methods: Drawing on Endogenous Growth Theory, Stakeholder Theory, and Dynamic Capabilities Theory, the paper develops an integrated conceptual framework. Drawing on an unbalanced panel dataset of 4,213 firm-year observations (2010–2020) from A-share listed high-end manufacturers, the study employs fixed-effects regression models to capture nonlinear innovation effects, mediation analysis to test ESG performance, and moderation analysis to assess the amplifying or constraining role of DT.

Findings & value added: The results reveal a U-shaped relationship between GTI (quality and quantity) and carbon emissions: while innovation reduces emissions at lower levels, it may generate rebound effects when excessive or misaligned. ESG performance mediates this relationship, particularly in state-owned enterprises, while DT moderates it as a double-edged capability—enhancing both the benefits and risks of innovation. The study advances strategic environmental management by reconceptualizing ESG and DT as core enablers of innovation, refining growth and innovation theories through the identification of nonlinear dynamics, and offering firm-level insights for carbon-intensive sectors in emerging and advanced economies alike.

Keywords

green technological innovation, ESG performance, digital transformation, carbon emissions, strategic sustainability, high-end manufacturing, emerging economies

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