AbstractDrawing on the behavioral theory, this study examines how the misalignment between a firm's environmental effort and the level of subsidies received from the government in affecting the firm's investment in non‐environmental R&D. Based on a sample of Chinese A‐share listed firms from 2008 to 2019 and using polynomial regression techniques, our findings reveal that firms in the “low effort‐high subsidies” group exhibit lower non‐environmental R&D intensity compared to firms in the “high effort‐low subsidies” group. This study contributes to the literature by shedding light on the interplay between corporate environmental efforts, government subsidies, and non‐environmental R&D investment. The findings suggest the importance of aligning the environmental efforts of firms with subsidy levels from the government to effectively allocate resources for different types of R&D. The implications of this research suggest that firms should carefully consider aligning their environmental efforts with government subsidies to optimize their investment in non‐environmental R&D and overall innovation strategy. Furthermore, the study indicates that firms and governments should prudently balance the relationship between environmental R&D and non‐environmental R&D to avoid any negative impact on the latter.

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