Green Gambles: The Impact of Gambling Preferences on Corporate Green Innovation

ABSTRACT Recent research seems to have converged on the dark side of gambling preferences, leaving their potential bright side underexplored. Drawing upon gambling research and cumulative prospect theory, this study examines whether and how local gambling preferences contribute to risky green innovation—a quintessential example of corporate rightdoing. Using a sample of publicly listed firms and lottery sales data from China—the world's largest carbon emitter and home to a deeply entrenched gambling culture—we find that firms in regions with higher social acceptance of gambling demonstrate significantly higher levels of green innovation, both in terms of output quantity and technological diversity. Consistent with the predictions of mental accounting theory and threat‐rigidity theory, this promotion effect is more evident among firms experiencing performance windfalls and less noticeable among those facing performance shortfalls. These results are robust to numerous tests addressing endogeneity issues, revealing the eco‐friendly side of gambling preferences.