Distance matters: Investigating how geographic proximity to ENGOs triggers green innovation of heavy-polluting firms in China.

Abstract Along with the growing concern over resource depletion and environmental damage, an increasing number of firms, especially heavy-polluting firms, have confronted with intense pressure imposed by various stakeholders like government, media and Environmental Non-Governmental Organizations (ENGOs). Specifically, ENGOs, as a classic informal institution, has gradually become as important as governments in stimulating polluting firms to reduce pollutant emissions and implement green innovation. At the same time, due to the imbalances of ENGOs' resource endowments and geographic distributions in various regions, the normative pressure from ENGOs on polluting firms may also differ by geographic distance. Given that, building on economic geography and institutional theory, the current study developed a theoretical framework to illustrate the relationship between geographic proximity to ENGOs and firms' green innovation. The roles of ownership types and regional pollution level are then examined. For a sample of Chinese heavy-polluting firms from 2009 to 2015 and employing multiple linear regression, the study found that a firm's geographic proximity to ENGOs affects green technology innovation positively and significantly. However, the effect of geographic proximity on green management innovation varies as the radius changes. In addition, the regression results also indicated that the positive relation between geographic proximity and green technology innovation is stronger in SOEs than in NSOEs. In turn, the positive relation between geographic distance beyond a 100 km radius and green management innovation is stronger in NSOEs than in SOEs. Moreover, the results further demonstrated that regional pollution level weakens the impact of geographic proximity to ENGOs on green management innovation. The study not only provides an enhanced understanding about the literature on corporate environmental responsibility but also has important practical implications for prompting heavy-polluting firms' green innovation with the aid of ENGOs.