Green Innovation and Resource Use Efficiency in GCC Firms: The Role of Workforce Capability and Governance

Abstract

This study examines whether environmental innovation strengthens resource use efficiency in Gulf Cooperation Council (GCC) firms and identifies the organisational conditions under which this relationship produces verifiable operational outcomes. Drawing on the natural resource‐based view, human capital theory and agency theory, this study develops a mediated–moderated framework in which workforce capabilities mediate the innovation‐to‐efficiency relationship while sustainability‐linked executive incentives and audit committee expertise act as governance‐level boundary conditions. Using an unbalanced panel of 1398 firm‐year observations from 281 listed GCC corporations over 2010 to 2024, retrieved from LSEG Datastream and the World Bank, this study employs a two‐step System‐GMM estimator to address endogeneity from lagged dependent variables and reverse causality, with instrument validity confirmed via Arellano–Bond AR(2) and Hansen tests. Environmental innovation enhances resource use efficiency both directly and indirectly through workforce capabilities. Sustainability‐linked incentives weaken the innovation‐to‐workforce pathway, and audit committee expertise dampens workforce contributions to efficiency, underscoring the need for governance structures that enable operational transformation.