New talent policies and corporate ESG performance: Raising awareness of unintended institutional effects

The global ‘war for talent’ is intensifying, but its potential unintended consequences remain insufficiently examined. Chinese cities are pursuing talent-driven development strategies and have introduced a series of distinctive new talent policies. Drawing on a quasi-natural experiment exploiting the staggered introduction of talent policies across Chinese cities, we find that corporate ESG performance declines significantly following policy implementation. We also find that the development of transportation infrastructure, the expansion of higher education resources, and managers’ overseas experience can induce this unintended institutional effect. Furthermore, mechanism tests indicate that the implementation of new talent policies reduces incumbent employees’ job satisfaction and prompts firms to cut their human capital investments, thereby lowering their ESG performance. Cross-sectional analyses show that these unintended effects are more pronounced among high-tech firms, small and medium-sized enterprises, and non-state-owned enterprises. Finally, sensitivity analyses suggest that these unintended effects manifest most prominently in the social dimension, followed by the governance dimension. Overall, our findings deepen the understanding of the incentive dynamics between newly recruited and incumbent employees, and offer important implications for policymakers seeking to design talent policies that anticipate and mitigate potential unintended consequences.