Integrating ESG and innovation: the path to ambidextrous and profitable corporate strategies

Abstract

Our study finds that firms that consider Environmental, Social, and Governance (ESG) aspects are positively associated with ambidextrous innovation, suggesting that firms simultaneously seek to implement both exploratory and exploitative innovations. Furthermore, we demonstrate that each component of the ESG score is positively associated with ambidextrous innovation. This implies that focusing on the E, S, and G aspects may also contribute to a firm's ambidextrous innovation. Additionally, we find that the positive association between ESG scores and financial performance intensifies among firms exhibiting high levels of ambidextrous innovation. This finding indicates that firms that simultaneously consider ESG and innovation tend to be more profitable. Based on this evidence, we underscore the interrelated associations between ESG scores, ambidextrous innovation, and financial performance.