Green technology innovation and firm value: bidirectional causality with moderating effects

Despite growing research interest, existing studies predominantly examine the green technology innovation-firm value relationship unidirectionally, overlooking potential bidirectional causality and contextual contingencies. Using simultaneous equations estimated by three-stage least squares on Chinese listed firms from 2008 to 2022, this study investigates the bidirectional relationship between green technology innovation and firm value, and how external factors (financial technology and environmental regulation) and internal factors (internal control quality and competitiveness) moderate these relationships. Results reveal that green technology innovation exhibits a U-shaped effect on firm value, with initial negative impacts that transition to positive effects as innovation intensity increases beyond a critical threshold. Second, firm value positively influences green technology innovation, establishing bidirectional causality that creates virtuous cycles. Third, financial technology, environmental regulation, internal control quality, and firm competitiveness play a positive moderating role in the reciprocal relationship between green technology innovation and firm value. These findings reveal bidirectional causality with nonlinear dynamics, offering insights on how firms can leverage green technology innovation for sustained value creation.