Abstract
This study is aimed to investigate the relationship between environmental performance, environmental innovation, and financial performance of firms. A total of 124 responses were collected from managers of manufacturers certified by ISO 14001 EMS in Malaysia, and the data was subjected to a structural equation analysis using the Smart PLS version 3.2.7 software. The results have endorsed environmental competitive capabilities i.e. environmental innovation and environmental performance as the key enablers for the creation of economic values for environmental proactive manufacturing firms. Moreover, environmental innovation is also found to be the mediator that transforms the benefits of environmental performance into financial performance.
Highlights
IntroductionThis study examines how dynamic capabilities emerged from proactive environmental practices can foster the creation of environmental capabilities that in turn enhance the competitive capabilities and financial performance of the firms
Business firms are increasingly adopting proactive environmental management as a business strategy to address the environmental challenges and enable the shift to green market competition
It is crucial for these firms to be equipped with environmental capabilities for sustaining firms’ competitive capabilities in terms of environmental performance and innovation, which would eventually lead to superior firm performance
Summary
This study examines how dynamic capabilities emerged from proactive environmental practices can foster the creation of environmental capabilities that in turn enhance the competitive capabilities and financial performance of the firms. Environmental capabilities refer to emergence of dynamic capabilities following the implementation of environmental strategies by the firms [1] Environmental competitive capabilities such as environmental innovation and environmental performance are arising from the outcome of proactive environmental management [2]. This study has examined the mediating role of environmental innovation in the relationship between environmental performance and financial performance among environmental proactive firms. Grekova et al [10] demonstrated the mediating role of environmental innovation between environmental management and firm’s performance. This study aims to investigate the relationship between firms’ environmental performance, environmental innovation, and financial performance Authors have considered the environmental performance and this study focuses on the environmental proactive context i.e. ISO 14001, where environmental strategies (environmental capabilities) are mostly in place, how would environmental competitive capabilities (i.e. environmental performance and environmental innovation) influence the financial performance of these firms? this study aims to investigate the relationship between firms’ environmental performance, environmental innovation, and financial performance
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