Short-term thinking, long-term costs: How managerial myopia undermines green innovation

Purpose: This study investigates the impact of managerial myopia on green innovation in Chinese listed companies from 2001 to 2021, focusing on how short-termism undermines sustainable innovation at both firm and industry levels. Design/methodology/approach: Utilising Management Discussion and Analysis (MD&A) textual analysis and corporate patent data, we employ high-dimensional fixed-effects and robustness tests to assess the relationship between managerial myopia and green innovation. Heterogeneity analysis and mediation models explore variations across firm types and mediating mechanisms, including R&D investment, digital transformation and environmental, social and governance (ESG) management. Findings/results: Results confirm that managerial myopia significantly inhibits green innovation, with stronger effects in non-state-owned enterprises (non-SOEs), non-heavy polluting firms and non-CEO-duality firms. At the industry level, managerial myopia indirectly suppresses green innovation through reduced R&D investment, limited digital transformation and weaker ESG management, as validated by mediation analysis. Practical implications: The findings offer policymakers and corporate leaders’ insights into aligning managerial incentives with long-term environmental and economic goals. Encouraging sustainable focus in non-SOEs and enhancing R&D and ESG practices could mitigate the adverse effects of short-termism on green innovation. Originality/value: This research integrates MD&A textual analysis with patent-based metrics to provide a novel perspective on managerial myopia’s impact on green innovation in an emerging market context. It elucidates nuanced mechanisms – R&D, digital transformation and ESG management – through which short-termism disrupts sustainability, contributing to the literature on corporate governance and environmental innovation.