Is environmental innovation contagious? A study on the mechanism of individual firms' environmental innovation affecting the industry

Based on the social network theory, this paper examined the contagion effect of a firm's environmental innovation on the industry. We selected the firm's ownership as the moderator variable and industry's financial performance as the mediator variable. Multiple regression analysis was used to test the model with the data of 1,588 listed firms among 28 industries in the Chinese manufacturing sector between 2012 and 2018. The results showed that the individual firm's environmental innovation had a contagion effect on the environmental innovation of other firms in the same industry, that is, the higher the degree of individual firms' environmental innovation, the higher the degree of environmental innovation will be in other firms. Further research indicates that the firm's ownership structure affects the environmental innovation contagion mechanism: when individual firms are privately owned, the contagion effect is stronger. In addition, the individual firm's environmental innovation undercut the financial performance of other firms in the same industry, which, in turn, promotes environmental innovation among these firms.