The impact of ESG engagement on corporate patenting strategy

• We examine the relation between ESG and corporate patenting strategy. • We find that ESG engagement drives a firm to adopt a defensive strategy. • The effect is more salient for state-owned, manufacturing, and large firms. • The mechanisms are government subsidies, media attention, and financing constraints. Using a sample of Chinese firms, we examine whether firms involved in ESG tend to choose an offensive patenting strategy of developing new patents to compete head-on with competitors, or a defensive patenting strategy of building a patent wall around existing core patents, based on the perspective of intrinsic linkages between patents. Our findings suggest that ESG engagement drives a firm to adopt a defensive patenting strategy. The effect is more salient for state-owned firms, manufacturing firms, and large firms. Additional analyses suggest that the underlying mechanisms are government subsidies, media attention, and financing constraints.