ESG Decoupling as an Information Governance Challenge

This study examines how ESG decoupling—misalignment between firms' disclosed ESG commitments and actual practices—shapes knowledge-driven digital innovation in emerging markets. Drawing on the institution-based and knowledge-based views, the authors analyze panel data from 723 Chinese manufacturing firms from 2013 to 2023 and identify an inverted U-shaped relationship between ESG decoupling and digital innovation performance. Moderate decoupling can ease compliance pressures and enable exploratory digital experimentation, whereas excessive decoupling undermines information credibility, erodes stakeholder trust, and restricts organizational learning. The authors further find that financial slack mitigates, while environmental uncertainty amplifies, this nonlinear effect. By conceptualizing ESG decoupling as an information governance challenge, the study offers new insights into how institutional conditions and internal resources jointly influence digital innovation outcomes in uncertain environments.