2110: Does Imbalance in ESG Dimensions Affect Firm Innovation? A Selective Stakeholder Management Approach (12232)

This study investigates the impact of Environmental, Social, and Governance (ESG) dimensional imbalance on firm innovation. Drawing upon stakeholder theory, we introduce the concept of “selective stakeholder management” to underscore the strategic prioritization of stakeholder relationships. We argue that firms focus on certain stakeholders based on three criteria: internal resources and attention constraints, the alignment between stakeholder demands and firm strategy, and the diversity of stakeholder-held resources. Our analysis encompasses 33,315 firm-year observations from 2009 to 2021. The results provide strong empirical support for our hypothesis that ESG dimensional imbalance increases the number of firm patent applications, indicating an increase in innovation. We further explore the moderating effect of firm nature on the main effect. Results show that the positive effect of ESG dimensional imbalance on firm innovation is weakened in the State-Owned Enterprise (SOE) state and strengthened in the High-Tech Enterprise (HTE) state. These insights contribute to our understanding of how effective stakeholder management can stimulate innovation, thereby bridging the gap in the literature on ESG and innovation.

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