Leveraging Green Innovation and Eco‐Technology for Sustainable Competitive Advantage: Firm‐Level Productivity Analysis in China and the United States

ABSTRACT This study contributes to the literature on sustainability, innovation, and productivity by examining the relationship between green innovation (GI) and firm‐level Green Total Factor Productivity (GTFP) in the United States and China. Drawing on resource‐based theory, dynamic capabilities, innovation theory, and cost–benefit analysis, the study investigates the roles of GI, eco‐technology intensity (EcoT), and absorption capacity in shaping GTFP. The sample includes 579 listed manufacturing firms from China and 612 from the United States between 2000 and 2022. To address potential endogeneity, dynamic generalized method of moment (GMM) estimator is employed, along with instrumental variables. The findings show that green utility patents positively impact GTFP in the United States whereas green design patents have a greater effect in China. Nonlinear results indicate that the impact of GI on GTFP increases at an accelerating rate with higher patent numbers, with stronger effects in the United States for utility patents and in China for design patents. Absorptive capacity plays a key role in mediating this relationship, with Chinese firms benefiting more from green design patents and US firms from green utility patents. EcoT moderates the relationship, with a more pronounced effect in the United States due to its advanced technological infrastructure. The study also reveals significant heterogeneity across industries and ownership types, and the results remain robust after several tests. Policy recommendations include promoting green utility patents in the United States, scaling green design patents in China, and strengthening absorption capacities. Tailored policies for different industries and ownership types are crucial to maximizing GTFP and promoting sustainable green innovation.