Extending Green Innovations Across Clusters: HOW can Firms Benefit Most?

Abstract

This paper analyses how green product and process innovations affect firms’ sustainable performance. It seems evident that green innovations should benefit not only society but also the firms, although it is not clearly stated how this relationship works, especially inside clusters. We theorise that green process and product innovations have a curvilinear relationship with firm sustainable performance and that the geographical concentration of clusters has a positive reinforcing role for green product innovations. To test these theoretical expectations, moderated regression and quantile regression were applied to a sample of 175 firms from the Spanish footwear industry. Results confirm that although green innovations do improve performance, they have an inverted “U” shape that makes investments in green innovation less profitable above a certain threshold. In addition, we observe that geographical concentration is stronger for green product innovations since green process innovations need more tacit-based knowledge and internal capabilities, making the cluster effect less significant.