Environmental governance and the digital-green shift of firms in Vietnam

Abstract

This paper investigates how provincial environmental governance shapes firms’ technology upgrading during the COVID-19 shock and early recovery in Vietnam. Using 1,886 firm-year observations for 2019–2021, the analysis combines the environmental governance sub-index of the Provincial Governance and Public Administration Performance Index with listed firms’ financial statements from FiinPro and applies panel regression models with rich fixed effects and event-time specifications to estimate the impact of environmental governance on corporate technology investment. The results reveal a robust positive association between effective environmental governance and technology upgrading, with stronger effects for pollution-intensive firms, financial institutions, and firms headquartered in export-oriented Southeast provinces. Event-time estimates further show that this relationship intensifies during the lockdown period and remains significant in the initial reopening phase, suggesting that capable local administration lowers uncertainty and transaction costs for digital and green investment when firms are under stress. These findings indicate that environmental governance functions as an important but often overlooked driver of the digital–green shift in an emerging economy context. Policymakers can foster resilient, innovation-led growth by strengthening provincial environmental governance capacity, integrating environmental management with industrial and digital transformation programs, and targeting support to small and medium-sized enterprises that face greater constraints in financing and implementing digital–green technologies.