From Competition to Creation: Environmental Strategy and Green Technology Innovation

Drawing on a market competition framework, this study develops a game-theoretic model of inter-firm environmental protection behavior, emphasizing transition processes and firm outcomes in the current and subsequent periods. The study reveals the catalytic role of peer competition in green innovation and analyzes the strategic interactions for firm growth under innovation diffusion, in which peer pressure can generate an environmentally driven dilemma and induce an innovation race. Using empirical data from the 13th Chinese Private Enterprise Survey (CPES), this paper finds pronounced peer effects in green technology (GT) creation by corporations: increased environmental peer competition (PC) spurs subsequent improvement by innovators, while incentivizing imitators toward original innovation. Second, the strength of the peer effects is moderated by financial factors and knowledge diffusion. Third, environment-related competitive behavior drives the differentiation of green innovation between imitators and innovators via a profit-squeeze mediation channel, and further analysis shows that such competition and green innovation are associated with technological advantage, enhanced risk management, and broader transitional gains. This dynamic process links current-period peer pressure to subsequent-period upgrading and firm-type transformation. By integrating theoretical insights and empirical evidence, the paper argues that corporate behavior intended to protect the environment, far from hindering corporate innovation, serves as a source of core competitiveness and a driving force for sustainable growth. Ultimately, environment-related competitive behavior facilitates capability development, offering critical policy implications to advance green industrial transitions.