Innovating through the storm: Green technological persistence under climate governance in textile firms

Abstract

Against the backdrop of intensifying climate risks and an ongoing green and low-carbon transition, an important question is how adaptation-oriented climate governance can help firms develop stable and persistent green innovation capabilities, thereby strengthening industrial climate resilience and improving the quality of green transformation. Using China’s climate-resilient city (CRC) pilot program as a quasi-natural experiment and data on textile-related firms listed on the Shanghai and Shenzhen A-share markets from 2013 to 2023, this study constructs a difference-in-differences model to systematically examine the effect of adaptation-oriented climate governance on persistent corporate green innovation and the underlying mechanisms. The results show that CRC development significantly promotes persistent corporate green innovation. This finding remains robust to parallel-trends and placebo tests, changes in clustering levels, lagged controls, and more stringent controls for region-specific time-varying factors. Mechanism tests show significant post-policy increases in managerial attention to climate issues and environmental investment, consistent with the theoretical predictions of two non-price channels based on risk perception and resource investment. Subsample regressions yield positive and statistically significant policy coefficients for the groups with greater public attention, greater analyst attention, and more advanced digital transformation. Further analysis shows that CRC development significantly increases the quantity of green innovation but has no statistically significant effect on green innovation quality as measured by patent citations. This study extends research on the microeconomic effects of adaptation-oriented climate policy from the perspective of persistent corporate green innovation and provides evidence for harnessing the green innovation synergies of climate adaptation policy to advance the green transformation of industries exposed to high climate risks.