The virtuous circle between green product innovation and performance: The role of financial constraint and corporate brand

Although the nexus between green product innovation (GPI) and firm performance has been studied, the impact of GPI on firm performance remains little understood and findings have been mixed. These mixed results of prior studies are attributable to failures to incorporate the intervening mechanism in studying the nexus between GPI and firm performance and to examine the impact of closely interlinked pertinent internal boundary conditions. This study attempts to overcome these shortcomings and contributes to the relevant literature in three significant ways. First, the findings indicate that GPI impacts a firm’s financial constraint, which affects its current and anticipated performance. Second, the relationship between GPI and financial constraint is moderated by a firm’s corporate brand equity. Third, GPI is both a predictor and a consequence of financial performance, indicating that the relationship between the two constitutes a virtuous circle. The results are robust to alternative measures of the performance variable and the alternative model estimation method.