ABSTRACT This study examines the green innovation determinants at the external–external level. The external–external perspective refers to examinations of the impact of a buyer's external stakeholders (institutional investors) on another external party of the buyer (suppliers), with a focus on the former's cross‐organizational sustainability spillover effects on the latter's green innovation. Based on delegated philanthropy and signaling theories, we analyzed 2010–2020 data from Chinese listed firms (970 buyer–investor–supplier pairs). A significant positive correlation is found between buyers' institutional investors' sustainability and suppliers' green innovation. This holds true after robustness checks including the Heckman two‐stage method, Poisson model, instrumental variable test, propensity score matching, hierarchical linear model, and generalized method of moments. This relationship is strengthened by buyer–supplier power dynamics (buyers' power over suppliers and suppliers' industry power) and is more pronounced among buyers in highly regulated industries, among larger buyers, and when suppliers depend more heavily on buyers. This study expands relevant theories and offers practical insights for firms and regulators promoting sustainability.
Yan et al. (Tue,) studied this question.