Synergistic governance or institutional friction? Joint evidence from digital and green city pilots on corporate ESG performance

Abstract

The transition toward sustainable development necessitates complex, multidimensional macroeconomic interventions. Over the past decade, the Chinese government has orchestrated a staggered rollout of place-based policies, most notably the Smart City pilots to propel digital infrastructure and the Low-Carbon City pilots to enforce stringent emission constraints. While isolated assessments of these spatial policies predominantly report positive environmental externalities, real-world regional governance operates under conditions of extreme resource scarcity and multi-tasking mandates. When local administrations are concurrently subjected to rapid digitalization targets and rigid decarbonization quotas, the resulting policy superimposition may trigger unforeseen micro-level distortions. Addressing this critical gap, the present study constructs a joint-evaluation framework to quantify the interaction effect of dual-pilot policies on corporate Environmental, Social, and Governance (ESG) performance. Drawing upon a comprehensive panel dataset of Chinese A-share listed companies from 2008 to 2023—yielding 83,081 firm-year observations—a multiple-period Difference-in-Differences (DID) estimation is deployed. Contrary to the idealized premise of policy synergy, empirical regularities herein uncover a robust institutional friction effect: while the standalone Low-Carbon City policy substantially enhances corporate ESG performance, the superimposition of Smart City mandates generates a highly significant negative interaction effect. This research departs from the conventional single-policy evaluation paradigm, unpacking the black box of cross-departmental policy compatibility. Furthermore, the Multi-tasking Agency Theory is enriched by demonstrating how capital-intensive digital infrastructure projects cannibalize local credit resources, thereby crowding out corporate sustainability investments. Integrating extensive heterogeneity and robustness checks, including unconfounded mechanism testing, robust causal inference is provided, setting a rigorous baseline for subsequent macro-policy coordination evaluations.