Carbon Pricing, Environmental Strategy, and Firm Performance: Evidence from Vietnam

Carbon pricing is widely promoted as a key instrument for driving low-carbon transitions, yet its effectiveness in emerging economies remains contested. While prior research largely focuses on developed contexts, less is known about how firms in transitional settings translate carbon pricing signals into strategic and performance outcomes. Addressing this gap, this study develops a moderated-mediation framework grounded in the Extended Porter Hypothesis, Institutional Theory, and Green Finance Theory. Using a two-wave survey of 380 carbon-intensive manufacturing firms in Vietnam, with a three-month time lag between data collection waves, and applying Partial Least Squares Structural Equation Modelling, the findings show that carbon pricing perception promotes environmental strategies and improves firm performance (FP), both directly and indirectly. By demonstrating that carbon pricing enhances FP only under specific institutional and financial conditions, this study challenges simplified assumptions about market-based environmental regulation and provides a clearer explanation of when — and when not — carbon pricing drives sustainable competitiveness in emerging economies.