The asymmetry of cost behaviour and green innovation: the moderating effect of government subsidies

Abstract

This study examines the relationship between cost stickiness and green innovation. Using data from Chinese public firms spanning the period from 2009–2020, we find that cost stickiness negatively affects green innovation, indicating that firms with sticky costs are associated with fewer green innovation activities. Also, it explores the moderating impact of government subsidies on the relationship between cost stickiness and green innovation. The results highlight the crucial role of government subsidies in mitigating this negative impact. Specifically, firms that receive R&D and green subsidies can better cope with the adverse effects of increased cost stickiness for green innovation than firms that do not receive such subsidies. The results remain consistent after addressing potential endogeneity concerns. This study contributes to the understanding of how cost behaviour and government interventions influence green innovation, offering practical implications for corporate management, policymakers, and sustainability practices.