The Effect of Environmental Performance Innovation: The Strategic Role of Institutional Ownership as a Moderator

Angelita Kracibaya Nauli  Panggabean; Dwi Suhartini

doi:10.35719/jieman.v7i1.290

Authors

Angelita Kracibaya Nauli Panggabean UPN Veteran Jawa Timur
Dwi Suhartini UPN Veteran Jawa Timur

DOI:

https://doi.org/10.35719/jieman.v7i1.290

Keywords:

Environmental Performance Innovation, Institutional Ownership, Corporate Governance

Abstract

This study aims to examine the impact of environmental performance on innovation and analyze the role of institutional ownership as a moderating variable. The increasingly critical issue of sustainability has prompted, especially in the manufacturing sector, the adoption of environmentally friendly practices that are believed to encourage innovation. However, the relationship between environmental performance and innovation still shows mixed results. This study employs a quantitative approach using Partial Least Squares-Structural Equation Modeling analysis on 150 observational data points from 30 manufacturing companies listed on the Indonesia Stock Exchange and participating in the PROPER program during the 2019-2023 period. The research findings indicate that environmental performance has a significant negative effect on corporate innovation. However, institutional ownership has been proven to positively and significantly moderate this relationship. These findings confirm that the presence of strong institutional investors can act as a catalyst in driving innovation amid environmental performance demands. This study has implications for policymakers and investors that proper ownership governance can create a balance between sustainability and corporate innovation in developing countries

References

Amanda Oktariyani. (2024). Analisis Pengungkapan Tanggung Jawab Sosial Dan Lingkungan Perusahaan Pertambangan Di Indonesia. Equivalent?: Journal Of Economic, Accounting and Management, 2(1), 232–246. https://doi.org/10.61994/equivalent.v2i1.375

Ana, R., Nurhayati, N., & Sari, D. (2024). Environmental disclosure and firm innovation in Southeast Asia. Asian Journal of Sustainability, 12(1), 45–60. https://doi.org/10.31004/innovative.v4i1

Deng, H., Li, C., & Wang, L. (2022). The Impact of Corporate Innovation on Environmental Performance: The Moderating Effect of Financing Constraints and Government Subsidies. Sustainability (Switzerland), 14(18). https://doi.org/10.3390/su141811530

Dimas Prihandana Jati, & Murwaningsari, E. (2020). Hubungan Book Tax Difference Terhadap Tax Avoidance dengan Manajemen Laba sebagai Variabel Moderasi. Jurnal Riset Akuntansi & Perpajakan (JRAP), 7(02), 203–218. https://doi.org/10.35838/jrap.v7i02.1651

Faturachman, D. (2023). Regulasi lingkungan dan kinerja inovasi perusahaan di Indonesia. Jurnal Manajemen dan Organisasi, 20(2), 132–144.

Global Carbon Project. (2023). Carbon budget and trends 2023. Retrieved from https://www.globalcarbonproject.org

Guo, Y., Xia, X., Zhang, S., & Zhang, D. (2018). Environmental regulation, government R & D funding and green technology innovation: Evidence from China provincial data. Sustainability (Switzerland), 10(4). https://doi.org/10.3390/su10040940

Hair, J. F., Hult, G. T. M., Ringle, C. M., & Sarstedt, M. (2017). A Primer on Partial Least Squares Structural Equation Modeling (PLS-SEM). SAGE Publications.

Jiang, Y., Zhang, W., & Li, X. (2021). Environmental regulation, green investment, and innovation: Evidence from China's manufacturing sector. Environmental Economics and Policy Studies, 23(4), 667–691.

KLHK. (2023). Laporan Kinerja PROPER 2023. Kementerian Lingkungan Hidup dan Kehutanan.

Li, D., Chen, X., & Tang, Y. (2020). Institutional investors and corporate innovation: Evidence from emerging markets. Finance Research Letters, 32, 101–110.

Liu, Y., Wang, A., & Wu, Y. (2021). Environmental regulation and green innovation: Evidence from China’s new environmental protection law. Journal of Cleaner Production, 297, 126698. https://doi.org/10.1016/j.jclepro.2021.126698

Makhdalena, M., & Zulvina, N. (2024). Environmental compliance versus innovation: A paradox in Indonesian firms. Indonesian Journal of Economics, 11(1), 23–39.

Porter, M. E., & Linde, C. Van Der. (1995). Toward a New Conception of the Relationship. 9(4), 97–118.

Setyowati, D. (2023). Sustainable business in Indonesia: Challenges and strategies. Jurnal Ekonomi dan Kebijakan Publik, 14(1), 1–12.

Ullah, F., Jiang, P., Elamer, A. A., & Owusu, A. (2022). Environmental performance and corporate innovation in China: The moderating impact of firm ownership. Technological Forecasting and Social Change, 184(January), 121990. https://doi.org/10.1016/j.techfore.2022.121990

Ulum, M., Sari, P., & Ramadhan, A. (2024). Corporate R&D strategy under sustainability regulation: Evidence from ASEAN. Asian Economic Review, 18(2), 87–103.

Wang, L., Liu, X., & Yu, H. (2023). How does environmental performance affect technological innovation? The moderating role of corporate governance. Corporate Social Responsibility and Environmental Management, 30(1), 51–63.

Wicaksono, A. P., Kusuma, H., Cahaya, F. R., Rosjidi, A. Al, Rahman, A., & Rahayu, I. (2024). Impact of institutional ownership on environmental disclosure in Indonesian companies. Corporate Governance (Bingley), 24(1), 139–154. https://doi.org/10.1108/CG-08-2022-0356

Wong, C. W. Y., Wong, C. Y., Boon-itt, S., & Tang, A. K. Y. (2021). Strategies for Building Environmental Transparency and Accountability.

Wong, M. Y., Kuan, C., & Ng, C. K. (2021). Institutional ownership and green R&D: A dynamic panel approach. Journal of Cleaner Production, 284, 124762. https://www.sciencedirect.com/journal/journal-of-cleaner-production/vol/475/suppl/C

Yuan, B., & Zhang, Y. (2020). Flexible environmental policy, technological innovation and sustainable development of China’s industry: The moderating effect of environment regulatory enforcement. Journal of Cleaner Production, 243, 118543. https://doi.org/10.1016/j.jclepro.2019.118543

Zhang, D., & Du, P. (2020). How China “Going green” impacts corporate performance? Journal of Cleaner Production, 258, 120604. https://doi.org/10.1016/j.jclepro.2020.120604

Zhao, X., & Sun, B. (2016). The influence of Chinese environmental regulation on corporation innovation and competitiveness. Journal of Cleaner Production, 112, 1528–1536. https://doi.org/10.1016/j.jclepro.2015.05.029