Green is the new black: How research and development and green innovation provide businesses a competitive edge

Abstract

AbstractAs part of the burgeoning research on green innovation (GI) and its influence on competitive advantage (CA), this paper examines the moderating effect of research and development (R&D) on this nexus. Our framework identifies five critical capabilities that contribute to CA, namely, firm image, labor costs, product differentiation, product quality, and market share. Using a novel bias‐correction methodology, we examined the Spanish Technological Innovation Panel (PITEC in Spanish) database from 2003 to 2016 to determine whether GI practices foster CA. Treatment‐effects analyses, including propensity score matching and fuzzy difference‐in‐differences (DiD), demonstrated that R&D expenditures have a positive moderating effect on CA when controlling for the covariates GI practices, firm age, and firm size. This research advances our understanding of the interplay between GI practices, R&D investments, and CA and, as such, has implications for decision makers aiming to create sustainable CA through GI. Our findings are also highly relevant for firms seeking to remain competitive in today's evolving business climate.