Abstract
Eco-innovation plays an increasingly important role for the competitiveness of companies. They open up new market opportunities due to the growing demand for eco-friendly products and can increase business efficiency. Using a dynamic capabilities lens, this article analyzes the relationships between various types of eco-innovation (product, process and organizational) and firm efficiency in the context of less innovative and more innovative companies. We use data from an online survey of Slovenian companies that have implemented eco-innovations as part of their operations. Statistical tests include an analysis of variance and a linear regression analysis.We find that organizational eco-innovation positively affects firm efficiency at all companies independent of their innovation potential, while process eco-innovation is positively associated with firm efficiency only among more innovative companies. In addition, at less innovative companies, firm age positively affects firm efficiency, suggesting that older and less innovative companies may enjoy learning curve benefits derived from experience. However, firm size has a positive effect on firm efficiency at more innovative companies, suggesting that more innovative companies may benefit from economies of scale. In general, more innovative companies are more likely to engage in eco-innovation and more likely to derive cost benefits (efficiency) from different types of eco-innovation.The main limitations of our analysis are the subjective data on the level of firms’ innovation and efficiency, the cross-sectional study design, and the single-country setting. Further in-depth longitudinal studies could better model the direction of causality between the implementation of eco-innovation and business efficiency, obtain objective data on business innovation, and ensure a more detailed and nuanced exploration of dynamic firm capabilities.
Highlights
The main limitations of our analysis are the subjective data on the level of firms’ innovation and efficiency, the cross-sectional study design, and the single-country setting
Based on the empirical evidence provided above, we can conclude that more innovative companies demonstrate higher levels of eco-innovation compared to less innovative companies
This supports the dynamic capability explanation [Teece et al, 1997] which posits that more innovative companies will demonstrate higher levels of eco-innovation compared to less innovative companies because they have already developed the requisite processes for engaging in, completing, sharing, and storing the outputs from the innovative process
Summary
The main limitations of our analysis are the subjective data on the level of firms’ innovation and efficiency, the cross-sectional study design, and the single-country setting. The circular economy is grounded in the three “R” principles—Reduce, Reuse and Recycle [Bourguignon, 2016; Ness, 2008; Su et al, 2013] It promotes the adoption of closed-loop and cleaner production processes and increases the efficiency of resource use in order to achieve a better balance between and harmony among the three pillars of sustainability: economy, environment and society [Ghisellini et al, 2016]. Ample prior research demonstrates that both companies’ environmental consciousness and customers’ purchasing choices are needed in order to facilitate the transition to a more circular economy [Agan et al, 2013; Hojnik, Ruzzier, 2016b; Horbach et al, 2012; Li, 2014]1 Both consumers and producers are important stakeholders in the adoption of eco-innovation, there is tension in the process of creating and capturing environmental, social, and economic value. In light of these tensions, we ask: (1) What specific types of companies are more likely to invest in eco-innovation? (2) What is the effect of different types of eco-innovation (i.e., product, process, and organizational) on firm efficiency?
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