Green Leadership: Exploring CEO Risk‐Taking and Resource Allocation in Sustainable Innovation

ABSTRACT This study examines the relationship between CEO risk‐taking propensity and sustainable innovation outcomes, emphasizing the moderating role of green R&D allocation. Drawing on a longitudinal dataset of 1723 firms across 10 European countries from 2012 to 2022, the research investigates how leadership traits, organizational mechanisms, and resource strategies converge to drive eco‐innovations, including green patents and sustainable product developments. The findings reveal that while CEO risk‐taking propensity alone has a modest influence on sustainable innovation, its impact is significantly amplified when firms allocate substantial resources to green R&D. This interaction underscores the pivotal role of strategic resource allocation in enabling bold leadership to translate into impactful environmental innovation. Moreover, the study demonstrates consistency across high‐ and low‐pollution industries and stricter and more relaxed regulatory environments, emphasizing the robustness of the results. The study's theoretical contribution is threefold. First, it extends upper echelons theory by emphasizing that leadership traits like risk‐taking do not operate in isolation but require strategic resource alignment to achieve impactful outcomes, challenging static assumptions about CEO influence. Second, it deepens the behavioral theory of the firm by showcasing how organizational slack, conceptualized here as green R&D investments, buffers uncertainty and actively enhances the ability of risk‐taking leaders to generate sustainable innovation. Third, the research advances the resource‐based view by reframing leadership as a complementary resource that interacts with green R&D allocation to create competitive advantages in sustainability. The implications are far‐reaching, providing actionable guidance for boards, policymakers, and other stakeholders in fostering innovation and sustainability.