The influence of institutional pressure on the target trade-off of state-owned enterprises: Evidence from China

Institutional theory suggests that state-owned enterprises (SOEs) tend to align with local government target to pursue sociopolitical legitimacy, particularly in emerging economies where reliance on government resources and legitimacy pressures are pronounced. This study examines the relationship between institutional pressure for economic growth target and SOEs' green investment, using data from Chinese listed SOEs between 2008 and 2022. The findings indicate that under institutional pressure to prioritize economic growth target, SOEs with multiple objectives forego environmental objectives by reducing green investments. Further analysis shows that local government intervention in economic and environmental objectives influences the trade-off between economic and environmental targets, thereby moderating the negative impact of institutional pressure on green investments from different perspectives. Cross-sectional analyses reveal variations in the effect at the societal, organizational, and individual level. Additionally, the study highlights that such legitimacy-driven expedient behavior undermines SOEs' environmental performance and exacerbates risks to their long-term sustainability. By illustrating how institutional pressures influence corporate investment decisions, this research provides theoretical insights into the legitimacy-driven target trade-off faced by SOEs between economic and environmental priorities.