Going Green and Innovation in Entrepreneurial Firms: An Exploratory Study

Abstract

This paper explores the relationship between firms going green and innovation. We examine two datasets: a cross-sectional dataset of more than 22,000 small businesses in 41 countries in 2020 and a panel dataset of almost 2,800 small businesses in Vietnam over the period 2011-2015. We find that firms going green are more innovative than firms not going green. Also, firms going green due to extrinsic pressure (requirements from customers and governments) are equally as innovative as firms going green due to intrinsic motivation (self-motivated). The channels that link going green to firm innovation include long-term vision, better operational practices, and efficient organisational communication. Finally, while market dynamism weakens the relationship between intrinsic motivation for going green and firm innovation, it strengthens the relationship between extrinsic motivation for going green and firm innovation. Our findings are robust in thousands of regressions that control for variable operationalisations, model specifications, estimators, endogeneity, and contexts.