How External Regulations Influence ESG Integration in Construction Firms: A Managerial Cognition Perspective

Abstract Limited understanding of how external regulations influence construction firms’ environmental, social, and governance (ESG) integration constrains policy effectiveness and industry sustainability performance. Drawing on neo-institutional theory and managerial cognition (MC), we examine how regulations influence construction firms’ ESG integration by leveraging managerial cognition of the ESG-firm performance link. Data from Chinese A-share listed construction firms is analyzed through ordinary least squares (OLS) regression and qualitative comparative analysis. Results show that government procurement projects, subsidies, and the ESG Best Practice Case Collection directly foster ESG integration, while ESG disclosure regulations and government penalties exert little impact. Peer ESG rating gaps also discourage ESG integration. Five regulatory configurations are identified, with normative pressures strengthening coercive effects. Managerial cognition mediates the influence of penalties, procurement projects, and best-practice collection on ESG integration. The findings highlight that project-based operational models influence the relationship between external regulations and ESG integration in construction firms. By revealing institutional and cognitive pathways, this study advances neo-institutional theory and ESG literature and offers actionable insights for policy makers and firms to integrate ESG.