Regional Perspective on ESG Practice and Corporate Innovation: Evidence from A-Share Listed Companies in Guangdong Province

Abstract

ESG performance has become increasingly relevant to corporate sustainability and long-term competitiveness. Drawing on stakeholder theory and the resource-based view, this study examines the association between ESG performance and corporate innovation using a panel dataset of 570 A-share listed companies in Guangdong Province from 2014 to 2023, comprising 5,700 firm-year observations. Corporate innovation is measured as the natural logarithm of one plus the total number of patent applications, while ESG performance is represented by the Huazheng ESG rating. A two-way fixed-effects model is estimated, controlling for firm size, leverage, profitability, operating cash flow, and firm age. The baseline estimates indicate a positive and statistically significant association between ESG performance and corporate innovation after observable firm characteristics and fixed effects are accounted for. This relationship remains positive in robustness analyses using an alternative ESG measure, excluding observations from 2020–2021, winsorising continuous variables, and including industry fixed effects. Subgroup analyses suggest that the association varies by ownership structure and firm size. Positive and statistically significant coefficients are reported for state-owned, non-state-owned, and small firms, whereas the estimate for large firms is not statistically significant. These findings provide regional evidence that stronger ESG performance is associated with greater patenting activity among listed firms in Guangdong Province. The findings suggest that policymakers should improve ESG disclosure systems and evaluation frameworks and encourage firms to integrate ESG practices with innovation strategies to support sustainable development. As the analysis is observational, the results should be interpreted as associations rather than definitive causal effects.