Identifying the Causal Effects of Design for Environment and Quality Management Innovation: A Study Based on Longitudinal Data

Abstract

This study aims to investigate the causal effects of Design for Environment (DFE) and Quality Management Innovation (QMI) on firm performance. Existing research, predominantly relying on cross-sectional data, struggles to effectively identify causal relationships and address endogeneity issues, leading to potential biases in assessing the economic benefits of DFE and QMI. To overcome this limitation, this study develops an analytical framework that integrates the Natural Resource-Based View (NRBV) and Dynamic Capability Theory. Using a balanced panel dataset of Chinese manufacturing firms listed from 2012 to 2022, we employ a staggered Difference-in-Differences (DID) model combined with Propensity Score Matching (PSM). We treat a firm's first-time ISO 14001 certification as a quasi-natural experiment for DFE implementation to accurately identify its true impact on both environmental and economic performance, and to test the mediating role of QMI. The findings reveal that DFE implementation significantly enhances both firm environmental and economic performance, with the effect peaking in the third year post-certification. Quality Management Innovation plays a crucial partial mediating role in the relationship between DFE and firm performance, suggesting that DFE amplifies its positive impact on performance by driving deeper innovations in the firm's quality management system. This research not only provides causal evidence for firms implementing environmental strategies and quality management innovations but also offers a decision-making reference for governments in formulating and evaluating related environmental policies, thereby deepening the understanding of value creation mechanisms on the path to sustainable development.