Innovation incentives, gender diversification, and corporate governance in an emerging market

Abstract This research reveals the connection between firm-level gender diversification and managers' impacts of innovation incentives on firms' business sustainability. The environment, social and governance (ESG) score is used as an indicator of business sustainability. The results show that both gender diversification and innovation incentives increase ESG performance. Compared with that of non-SOEs, the contribution of gender diversification is limited in state-owned enterprises (SOEs). This is attributed to the rigidity of the close policy following strategy. However, such strategic rigidity reduces the negative impact of agency costs when a firm experiences duality and when the general manager has excessive power. This research contributes to more than providing empirical evidence of the impact of gender diversification and innovation incentives on ESG performance. It also analyzes the heterogeneous impact of gender diversification when firm characteristics are different, which provides high policy amendment value.