The Effect of Green Innovation Strategies on Firm Internal Operations: Evidence from Human Capital Structure Adjustment

Abstract

Although prior studies have broadly examined the external economic consequences of corporate green innovation (GI) strategies, whether and how GI strategies influence firms’ internal operations is underexplored. To fill this significant gap, we investigate the effect of GI initiatives on firm human capital structure, as represented by the ratio of salesmen (RSE) and accountants (RAE) to total employees. A higher RSE (RAE) plausibly indicates an enhanced position of salesmen (accountants) in human capital and greater importance that firms attach to their crucial role in improving marketing (reporting). Consistent with GI enhancing consumer purchase willingness, we find that GI lowers RSE. In line with GI reducing financing constraints and firms’ emphasis on high-quality financial reporting, we record that GI decreases RAE. Moreover, such inhibitory effects become stronger when stakeholders’ recognition of GI strategies grows, or when firms ex-ante rely more on marketing (reporting) functions of salesmen (accountants).