Leading Green: The Role of CEO Social Trust and Governance in Driving Sustainable Innovation

Abstract

Drawing on imprinting theory, this study examines the impact of CEO social trust on sustainable corporate practices, that is, firm‐level green innovation. Using a unique hand‐collected dataset on CEO social trust, we found that CEO social trust is positively associated with firm‐level green innovation. Also, this study found that various external governance factors, including media coverage, high audit quality, and environmental enforcement intensity, strengthen this relationship. Furthermore, additional analysis shows that the relationship is particularly pronounced in firms where managers have higher ability, CEOs are older, and firms operate within polluting industries. Our main result is robust across alternative measures of green innovation and multiple robustness tests. This study highlights the importance of institutional contexts and psychological traits in shaping the firms' strategic sustainability decisions. This research has practical implications for policymakers, managers, and practitioners in the areas of leadership development, recruitment, and environmental policy formulation.