Abstract: Environmental problems have attracted worldwide attention, and there are growing concerns about environmental destruction. Due to a large amount of pollution from manufacturing processes, manufacturing companies, especially those from heavy-polluting manufacturing industries, should shoulder the responsibility of pollution control and treatment. With the increase of people’s environmental awareness, manufacturing companies undertake environmental practices due to corporate social responsibility and consumers’ preference for green products. In China, given that environmental problems are aggravated by the rapid growth of Chinese manufacturing, it is difficult to obtain significant progress only by using traditional pollution control methods. Green innovation, which aims at reducing environmental impacts by improvements of product, process, technology and the manufacturing system, is receiving increasing attention from the government and academics, and becomes an important strategy to realize the transformation of manufacturing industry and green development. Green innovation can be divided into green product innovation, green process innovation and green organizational innovation, and green process innovation is the main focus of this study. Although some companies from manufacturing industry have tried to conduct green innovation strategies, there is limited practical experience and related literature based on the context of environmental protection in China.Green process innovation can be divided into cleaner technology innovation and end-of-pipe technology innovation. Lack of segmentation study of green process innovation makes it difficult to have a good understanding of each segment of green process innovation. On the other hand, green process innovation can create novel business opportunities; however, it can also bring high costs. Most existing literature focuses on the direct relationship between green process innovation and financial performance of the manufacturing industry. Actually, even with much resource, economic and technological investment over a considerable period of time, many companies from the manufacturing industry cannot see the expected financial rewards. This is because the possible financial awards need time to materialize, and the awards depend on the underlying mechanism and contingent conditions for the relationship between green practices and the financial performance. Thus, examining the moderators and mediators of the relationship between green process innovation and financial performance of manufacturing industry is helpful to open the black box associated with the relationship between green process innovation and financial performance of manufacturing industry.Based on the background of high environmental concerns from the government and the public, and little research on green process innovation, this study examines the direct relationship between green process innovation and financial performance of manufacturing industry from the perspectives of cleaner technology innovation and end-of-pipe technology innovation. Second, this study examines the moderation effect of resource constraints on the relationship between green process innovation and financial performance of manufacturing industry. Third, this study examines the mediation effect of absorptive capacity on the relationship between green process innovation and financial performance of manufacturing industry. Therefore, using a mediated moderation model, this study explores the moderation effect of resource constraints and the mediation effect of absorptive capacity on the relationship between green process innovation and financial performance of manufacturing industry by using a panel data of 28 manufacturing industries over 10 years. Financial performance of manufacturing industry is measured by three different financial indexes. As the emission and reduction of SO2 are closely related to environmental activities, SO2 is used as the proxy of cleaner technology innovation and end-of-pipe technology innovation. Data used in this study are mainly drawn from the China Statistical Yearbook (2002-2011), the China Statistical Yearbook on Science and Technology (2002-2011) and the China Environmental Statistical Yearbook (2002-2011). The 28 manufacturing industries are determined based on the Classification of National Economic Industries (GB/T 4754-2011) from the National Bureau of Statistics of China.The empirical results show that there are small differences between the empirical results from the perspectives of cleaner technology innovation and end-of-pipe technology innovation. More specifically, there is a positive relationship between each aspect of green process innovation and financial performance of the manufacturing industry, and cleaner technology innovation has a more significant effect on the financial performance of the manufacturing industry. The results also show that resource constraints enhance the positive relationships between cleaner technology innovation, end-of-pipe technology innovation, and financial performance of the manufacturing industry, and have a more significant effect on the relationship between cleaner technology innovation and financial performance of the manufacturing industry. Further, absorptive capacity mediates the moderation effect of resource constraints on the relationship between cleaner technology innovation and financial performance of the manufacturing industry. However, absorptive capacity does not mediate the moderation effect of resource constraints on the relationship between cleaner technology innovation and financial performance of the manufacturing industry. Thus, green process innovation has a significant impact on the financial performance of the manufacturing industry, and this relationship is affected by the moderation effect of resource constraints and the mediation effect of absorptive capacity.On the whole, both cleaner technology innovation and end-of-pipe technology innovation have positive impacts on the financial performance of the manufacturing industry. These findings provide references for the manufacturing industry, in terms of green strategic orientation and decision-making. Meanwhile, these findings also provide a new perspective for the opinion that although green process innovation can bring about extra costs largely, it pays to be green. Accordingly, manufacturing industry needs to carry on long-term investment in cleaner technology innovation, and try to develop innovation and make progress in technologies of pollution abatement. Activities of green process innovation require innovation, and such activities often face a high level of uncertainty and risks due to their possible externalities. Thus, the manufacturing industry should have a positive attitude towards the impacts of resource constraints, and improve their absorptive capacity, in order to obtain more financial gains from green process innovation. From the perspectives of cleaner technology innovation and end-of-pipe technology innovation, this study enriches the theoretical research on green process innovation, and provides novel suggestions for manufacturing industries on how to gain more benefits from green process innovation.

Key words:  green process innovation, resource constraints, absorptive capacity, financial performance