Environmental, Social, and Governance Performance as a Driver of Green Innovation: Evidence from Green Patent Data

ABSTRACT This study examines the relationship between environmental, social, and governance (ESG) performance and firms' green innovation (GI), positioning ESG as an organizational context potentially conducive to sustainable technological transformation. Using a patent‐based methodology, GI is measured through firms' granted green patent outputs, providing a tangible indicator of green technological innovation. Based on 3314 firm‐year observations from 17 countries over 2002–2021, baseline estimations use OLS models with multiple fixed effects, complemented by count‐data and alternative specifications. The findings show a positive and statistically significant relationship between ESG performance and GI, which remains consistent across alternative specifications. The environmental, social, and governance dimensions are each positively associated with green patent output, with the environmental dimension exhibiting the largest coefficient in the baseline estimates. Additional mechanism analyses indicate that R&D intensity and analyst coverage serve as significant partial mediating channels. R&D intensity represents a firm‐internal innovation input, whereas analyst coverage captures external information and monitoring environment. Overall, the findings provide cross‐country evidence that ESG performance is associated with tangible green technological outcomes and suggest that this relationship may operate through both internal resource allocation and external information and monitoring channels.