Companies with strong environmental, social and governance (ESG) performance are more successful at expanding research and development (R&D) overseas.
The research was led by Professor Xinming He, from our Business School, in collaboration with Xi Zhong (Shenzhen University) and Jianquan She (Guangdong University of Technology).
The study explored how ESG performance influences firms’ overseas R&D initiatives and under what conditions this effect is strongest.
The team analysed a dataset of 1,180 firm year observations from Chinese listed companies between 2007 and 2023.
They compared ESG performance over time with increases in overseas R&D activity.
They found that companies with strong ESG credentials gain additional credibility internationally.
This helps them attract investors, secure partnerships, and receive government support in foreign markets.
For company owners, the study highlights that ESG is becoming a powerful currency for accessing international innovation ecosystems.
The researchers caution that environmental violations can undermine these benefits. Companies that breach environmental regulations may see their ESG reputation suffer.
This can make international collaboration and access to innovation funding more difficult.
To prevent this, firms need robust environmental controls and regular audits.
Staff training and independent verification are also essential to ensure ESG claims are credible.
The study notes that ESG signals sent by state-owned enterprises are often interpreted as compliance driven rather than genuine. This reduces their impact.
The researchers suggest these firms may need alternative approaches.
These could include acquiring foreign technology or working closely with local governments and businesses in host countries.
Such strategies may better support overseas R&D and long-term innovation goals.
The findings suggest policymakers can accelerate international innovation by strengthening ESG reporting standards.
Incentivising verifiable ESG improvements may also play a key role.
As ESG becomes a global language for responsible business, firms demonstrating authentic and measurable progress stand to lead the next wave of international innovation.
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