Youxue Jiang, Lin Hui
This study examines whether firms that perform better on Environmental, Social, and Governance (ESG) dimensions are more able to create value together with external stakeholders, and why this is the case. Drawing on stakeholder and information-asymmetry perspectives, we argue that ESG performance supports value co-creation mainly by improving access to external finance and by strengthening trust-based relationships. We test these ideas using panel data on Chinese A-share listed firms from 2009-2023. Value co-creation is captured through customer participation in business relationships and joint patent applications. Firm fixed-effects regressions and additional checks show that stronger ESG performance is consistently associated with higher levels of value co-creation. Among the three ESG pillars, the Social component has the largest impact, underscoring the role of practices related to employees, customers, and communities. Mediation analysis using the SA index indicates that part of ESG’s effect operates through eased financing constraints, which enable firms to invest more in long-term collaborative projects. We also find that higher digital transformation is associated with a weaker marginal effect of ESG on value co-creation, a context-specific pattern that suggests complex digital systems may sometimes dilute ESG signals or create coordination frictions. The positive ESG-co-creation relationship is stronger in non-polluting and non-high-tech industries, in state-owned enterprises, and in firms located in less-developed regions. Overall, the study clarifies how, and under which conditions, ESG performance can be translated into concrete collaborative outcomes in an emerging-market context.