Unintended Environmental Consequences of Innovation Policy: Evidence from Pro-Blockchain Legislation

Purpose - While innovation policies are often assumed to deliver business value and performance improvements to firms, there are growing concerns regarding their unintended environmental consequences. This study explores this phenomenon by examining the environmental effects of pro-blockchain legislation (PBL) on firms. Design/methodology/approach - Based on the enactment of PBL across U.S. states, the analysis employs a quasi-natural experiment via a staggered difference-in-differences approach. The study employs a sample of 875 firms with 4,458 observations spanning the period from 2013 to 2022. Findings - The study reveals a negative relationship between PBL and corporate environmental performance (CEP), such that firms incorporated in states that enacted PBL experienced a significant decline in CEP relative to firms in states without this legislation. Drawing on stakeholder theory, the study further finds that this negative relationship is stronger for firms with higher levels of institutional ownership. However, firms with top management teams (TMTs) that are long-term-oriented experience a positive effect of PBL on CEP. Originality – As one of the earliest empirical investigations of the environmental consequences of blockchain legislation, this study provides evidence of the potential negative effects of innovation policies on firms’ CEP. Additionally, this study advances stakeholder theory by offering nuanced insights into the moderating effects of institutional ownership and long-term managerial orientation in achieving environmental objectives in the PBL context.