<scp>ESG</scp> Ratings and Firms' Engagement in Global Innovation Ecosystems: Implications for Green Innovation Capacity

ABSTRACT The increasing salience of climate change has intensified attention to the roe of ESG ratings in shaping firms' green innovation. We examine the link between ESG performance and green innovation, highlighting the role of participation in global innovation networks. Our results indicate that higher ESG ratings significantly enhance green innovation. Heckman two‐stage estimates further reveal that ESG engagement encourages firms to integrate into global innovation networks, thereby strengthening their green innovation capacity. The effects, however, vary across firms' resource endowments, ownership types, and regulatory environments. Further mechanism tests reveal that supply chain concentration, managerial myopia, and financial distress weaken the ESG‐innovation link, whereas corporate digitalization strengthens it. These findings suggest that ESG practices can function as a strategic instrument for promoting green innovation. Accordingly, enhancing ESG disclosure standards and improving institutional support for global innovation collaboration can accelerate green technological upgrading. For firms, embedding ESG practices into strategic decision‐making and advancing digital transformation can enhance innovation resilience and long‐term competitiveness. Overall, our framework positions ESG not merely as a compliance device but as a strategic lever for sustainable innovation and global competitiveness in the transition to a low‐carbon economy.