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Environmental Innovation and Firm Performance: How Firm Size and Motives Matter

Author

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  • Petra Andries

    (Department of Marketing, Innovation, and Organisation, Faculty of Economics and Business Administration, Ghent University, Tweekerkenstraat 2, 9000 Ghent, Belgium)

  • Ute Stephan

    (King’s Business School, King’s College London, Bush House 30 Aldwych, London WC2B 4BG, UK)

Abstract

There is limited understanding of the precise circumstances under which environmental actions—such as environmental innovation—contribute to firm performance. Building on the resource-based view and on stakeholder theory, this study argues that the general positive effect of environmental innovation on financial performance varies significantly with firm size and the motives underlying a firm’s engagement in environmental innovation. Integrating survey data and lagged annual account data on 1761 Flemish companies, we find that larger firms benefit financially from environmental innovation driven by regulation or industry codes of conduct, while smaller firms benefit from environmental innovation introduced in response to customer demand. While it is increasingly accepted that environmental innovation relates positively with firm performance, the current study highlights important boundary conditions of this relationship.

Suggested Citation

  • Petra Andries & Ute Stephan, 2019. "Environmental Innovation and Firm Performance: How Firm Size and Motives Matter," Sustainability, MDPI, vol. 11(13), pages 1-17, June.
    • Handle: RePEc:gam:jsusta:v:11:y:2019:i:13:p:3585-:d:244133
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