Corporate environmental responsibility under relative power

Despite growing public and regulatory pressures, heavy polluting firms remain reluctant to engage in corporate environmental responsibility (CER). While prior research has examined government–firm relations largely under the implicit assumption of government dominance, few studies have investigated how corporate dominance influences managerial cognition and behavior. Integrating insights from the resource-based view on power advantage and managerial myopia theory, we propose that a firm’s power increases with the Government’s Greater Dependence on the Firm, fostering opportunistic tendencies and reducing CER. Furthermore, we argue that Managerial Myopia mediates the relationship between Government’s Greater Dependence on the Firm and CER. These hypotheses were empirically validated through an analysis of Chinese heavily polluting firms with a time span from 2013 to 2019. Drawing on the strategic tripod framework, we also identify two boundary conditions: higher Peer CER and lower Government Administrative Hierarchy amplify the negative effect of Government’s Greater Dependence on the Firm takes on CER. Our study contributes to the CER literature by introducing a corporate power perspective, extends cognitive theory by underscoring the role of Government’s Greater Dependence on the Firm in exacerbating managerial myopia, and illuminates the interplay among resource-based, industry-level, and institutional antecedents of CER.