Capabilities Before Commitments? Green‐Innovation Persistence, ESG Performance, and Net‐Zero Pledges in China and Europe

ABSTRACT

We examine to what extent firm‐level green patenting is persistent, whether ESG performance and net‐zero commitments condition this persistence, and whether these associations differ between China and Europe. Using firm‐level panel data for Chinese and European listed companies from 2011 to 2020, we estimate dynamic firm fixed‐effects models with sector‐year and country‐year controls. We find that green patenting is strongly persistent among Chinese firms and significantly less persistent among European firms, revealing pronounced regional heterogeneity that is consistent with, though not attributable solely to, institutional differences. In China, overall ESG performance strengthens the translation of prior green‐innovation capability into subsequent patenting, and the environmental‐pillar interaction is likewise positive and significant. European evidence is consistent with firms possessing stronger prior green‐innovation capability being more likely to adopt net‐zero pledges. A positive post‐adoption interaction is consistent with pledges reinforcing existing capabilities, but it is driven by a single treated firm‐year and therefore remains only suggestive. These conditional associations are consistent with accumulated technological capability, proxied by prior green patenting, being the key conditioning factor for subsequent green innovation in our samples. ESG performance may strengthen the deployment of that capability, whereas the role of formal net‐zero commitments remains suggestive given the limited European treatment window. For policymakers and corporate leaders, the results imply that disclosure requirements and pledge frameworks should be combined with sustained support for green R&D, specialized human capital and implementation capacity.