Asset Replacement and Green Innovation: Dynamic Complementarity and Paradoxical Effects on Carbon Intensity in Korean Firms

Using a balanced panel of 93 Korean firms over 2014–2023, this study examines how the interaction between green innovation and asset replacement strategies is associated with changes in carbon intensity over time. Distinguishing between tangible and intangible asset pathways, we identify two contrasting temporal patterns. When green innovation is embedded in intangible asset renewal, it is associated with delayed but persistent reductions in carbon intensity, consistent with organizational learning and capability accumulation. In contrast, when embedded in tangible asset replacement, green innovation is associated with short‐term increases in carbon intensity, consistent with rebound‐type mechanisms such as scale expansion, with effects that dissipate over time. These findings suggest that the environmental implications of green innovation are not uniform, but depend on how innovation is embedded within firms' asset structures and how these effects unfold over time. By identifying an asset‐type‐specific temporal embedding mechanism, this study explains heterogeneous environmental outcomes across firms and provides new insights into aligning innovation and asset strategies under transition risk.