The Importance of the Diverse Drivers and Types of Environmental Innovation for Firm Performance

Abstract

Today, firms are faced with a number of environmental challenges, such as global warming, pollution control and declining natural resources. While there is increasing pressure to deliver environmentally friendly products and services, little is known about what drives the many different types of environmental innovation, or how such pursuits' impact firm performance. Using a sample of 2181 firms, this paper examines the factors that drive nine different types of eco-innovation in Ireland, and assesses how such innovations impact firm performance. We find that, while demand-side, supply-side and regulatory drivers impact on the likelihood of a firm engaging in eco-innovation, the relative magnitudes of these impacts vary across the types of eco-innovation considered. Moreover, we find that only two of the nine types of eco-innovation positively impact firm performance. The results point to regulation and customer pressure as viable mechanisms through which firms can be encouraged to eco-innovate.