How does institutional investor climate activism affect exploitative and exploratory green innovation?

Based on resource orchestration theory, this study examines how institutional investor climate activism (IICA) affects exploitative and exploratory green innovation. We also examine the moderating role of managerial climate risk perception. Using data on firms listed in China during 2015–2023, we find that IICA promotes firms to pursue exploitative and exploratory green innovation. Furthermore, managerial climate risk perception has an incentive effect on the association between IICA and exploitative green innovation; this incentive effect is more pronounced in firms receiving higher government innovation subsidies. However, managerial climate risk perception has a crowding-out effect on the association between IICA and exploratory green innovation. This crowding-out effect is weaker for firms that benefit from higher innovation subsidies. This study extends key insights from financial-related institutional investor activism to non-financial IICA and highlights the importance of IICA in corporate climate risk management practices.