Does green innovation facilitate buyer firms’ attainment of trade credit from suppliers? A signalling theory perspective

Purpose: As a crucial supply chain financing instrument, trade credit has become increasingly important for firms to enhance financial flows in supply chains. Yet, scant research has examined how firms’ green innovation affects the attainment of trade credit from their suppliers. To bridge this gap, this study aims to draw on signalling theory to investigate the impacts of incremental green innovation (IGI) and radical green innovation (RGI) on trade credit and the contingent roles of supplier concentration and industry dynamism. Design/methodology/approach: Using a data set of 3,302 Chinese listed manufacturing companies from 2007 to 2021, our research adopts fixed-effect regression models to test the proposed hypotheses. Findings: The authors find that both IGI and RGI exert a positive effect on trade credit. Interestingly, supplier concentration weakens the association between RGI and trade credit, whereas it does not significantly influence the association between IGI and trade credit. Moreover, industry dynamism attenuates the relationship between IGI and trade credit, whereas it does not significantly alter the relationship between RGI and trade credit. Originality/value: The paper extends the supply chain finance literature by applying signalling theory to uncover the effects of IGI and RGI on trade credit and the distinct contingency roles of supplier concentration and industry dynamism. It also provides supply chain managers with important implications regarding how to tailor the strategies of implementing different types of green innovation to acquire more trade credit in different situations.