Geography Dispersion and Green Innovation: Evidence From China

ABSTRACT Using a sample of Chinese A‐share listed firms, we empirically investigate the effect of geographic dispersion on corporate green innovation. We provide evidence that geographic dispersion enhances green innovation activities, and our findings remain robust across a series of robustness tests. The mechanism analysis indicates that legitimacy pressure acts as the underlying channel. Furthermore, the analysis of economic consequences reveals that green innovation driven by geographic dispersion is positively associated with environmental performance, government subsidies, institutional ownership, stock returns and corporate reputation. Cross‐sectional analyses indicate that the positive effect of geographic dispersion on green innovation is more pronounced among firms with lower performance pressure, fewer financing constraints and operations in polluting industries. By incorporating legitimacy theory into the framework, our findings underscore geographic dispersion as a significant determinant of corporate green innovation.