Institutional Empowerment: How National Pilot Zones for Innovative Development of Artificial Intelligence Affect Corporate ESG Performance?

Abstract

Artificial intelligence (AI) is increasingly viewed as a lever for the low-carbon transition, yet little is known about whether policy interventions that build AI capacity translate into better corporate environmental, social, and governance (ESG) outcomes. Exploiting the designation of National Pilot Zones for Innovative Development of Artificial Intelligence (NPAI) as a quasi-natural experiment, we study A-share listed firms in China over the period 2009–2023 using a multi-period difference-in-differences (DID) design. The estimates show that locating in an NPAI city raises a firm’ s ESG score, and this result survives several robustness exercises-event-study parallel-trend tests, placebo permutations, and a propensity-score-matched DID specification. We further document three channels-resource allocation, green innovation, and digital transformation-through which the policy operates. The effect is concentrated among firms in eastern China, those whose executives pay closer attention to environmental matters, and non-state-owned enterprises. The findings speak to how emerging economies can pair AI industrial policy with sustainability objectives.