Does Green Innovation Improve Firm Performance? Testing the Moderating Effect of CEO Tenure

Nowadays, green innovation has become a concern because of the global pressure to do business without neglecting environmental sustainability. Thus, this study aims to examine the impact of green innovation (both process and product) on improving firm performance and test whether CEO tenure can affect the relationship between green innovation and firm performance. This study uses panel data from the 2016–2021 period for 108 manufacturing firms in Indonesia, for a total sample of 597 firm-years. This study has executed feasible general least squares (FGLS) to examine the relationship between variables and to control for heteroscedasticity and serial correlation in the research model. In addition, we tested the robustness of the model to confirm the results. The results of the study show that green process innovation (both process and product) has a significant relationship with improving the performance of manufacturing firms in Indonesia. Meanwhile, CEO tenure moderates this relationship by weakening it. This finding suggests that CEO tenure plays an important role in green innovation implementation decisions. This study will be useful for researchers, managers, and policymakers in understanding issues related to the implementation of green innovation in firms.