Corporate Innovation Governance and Environmental Sustainability: Insights From Japan

ABSTRACT This study examines the long‐term association between business enterprise research and development (BERD), conceptualized as a corporate innovation channel, and environmental sustainability in Japan. While prior research has predominantly emphasized public‐sector innovation, comparatively less attention has been given to how BERD contributes to environmental sustainability outcomes at the macro level. Grounded in the Porter Hypothesis and the Load Capacity Curve framework, this study investigates whether sustained BERD is associated with improvements in environmental sustainability over time. Using annual data for Japan covering the period 1981–2022 and applying a Fourier‐Augmented ARDL approach to account for gradual structural changes, the analysis distinguishes between short‐run and long‐run dynamics. The results indicate that BERD has no statistically significant effect in the short run; however, a positive long‐run association emerges. This pattern suggests that the sustainability implications of corporate innovation materialize gradually through technological diffusion and structural transformation rather than through immediate environmental gains. Renewable energy use and urbanization are also found to contribute positively to environmental sustainability over time. Overall, the findings indicate that sustained corporate innovation commitment and institutional alignment are associated with long‐term environmental outcomes. The study contributes to the corporate sustainability literature by clarifying the dynamic relationship between BERD intensity and environmental sustainability within an advanced industrial economy.