Abstract

     This paper focuses on the relation between business innovation modes and environmental innovation. Over time firms have recognized the importance of prioritizing innovation to gain competitive advantages in open markets. Yet, in more recent times with the more recent international agreements on environmental sustainability (rounds in Doha in 2004; Copenhagen in 2009; Paris in 2016; and Glasgow in 2021), innovation needs to be guided through new boundaries and requirements that individual businesses and the business system as a whole face. One of these boundaries is nature and its resources which require significant protection as part of the international priority agenda on climate change agreed by most countries with the 2016 Paris Agreement on the Environment and recently confirmed with COP26. As firms are found to adopt alternative archetypical strategies of innovation, some science-driven (STI innovation mode) and others practice-driven (DUI innovation mode), we investigate whether any of these strategic modes is beneficial in relation to the capacity of the firms to produce eco-innovations, and which one is more beneficial in relation to which type of eco-innovation (e.g. technological and non-technological innovation). This analysis is seen in relation to the size of the firms as SMEs typically rely on practice and interactive-based innovation activities (DUI mode). This may help design environment protection-orientated policies that focus on specific drivers, thus making policy action efficient and effective. The analysis is based on the Community Innovation Survey (CIS) database for European countries. Our findings support the view that both STI and DUI drivers support eco-innovation through technological nuances that work also in the specific case of SME environmental innovation.

Introduction

     Environmental protection and sustainability have become a priority across the world economy from the Bruntland Report (WCED, 1987) and Rio de Janeiro earth summit in 1992 and the following international agreements in Kyoto, Doha, Copenhagen up to the recent Paris Agreement in 2016 and COP26 in Glasgow. Environmental protection and the control of climate change have become crucial goals of the United Nations (United Nations, 2021). Simultaneously, innovation has become a clear priority for economic development as it represents the key driver for competitiveness in the current globalized markets (Hollanders et al., 2009; Edler and Fagerberg, 2017). However, innovation and environmental sustainability do not necessarily go hand in hand. The “weak sustainability” approach would entail the possibility to compensate for part of the depleted natural resources for some other form of capital (i.e. human capital or physical capital) within the overall “constant capital rule” (Wall, 2013). This dilemma motivates our work on the relation between firm-level innovation and environmental sustainability. In this study we utilize the “business innovation modes” framework that is derived from the literature on innovation systems (Jensen et al., 2007; Amara et al., 2008; Asheim and Parrilli, 2012) to analyze critical behaviours and strategies of innovation across firms that belong to specific production and innovation systems. We explore whether the two archetypical business innovation modes (science and technology based or STI, and innovation based on learning-by-doing, by-using and by-interacting or DUI) are critical for environmental innovation and to what extent (see Jensen et al., 2007; Parrilli et al., 2020). In addition, we analyze whether the behaviour of small and medium-sized enterprises (SMEs) differs from the general trend and to what extent. This evidence can help identify policy actions that might have an impact on eco-innovation across SME.

Conclusions and discussion

۵٫۱٫ Main findings

     Overall, our analysis produces relevant findings in relation to the impact of specific STI and DUI drivers on the eco-innovation practices and performance of all firms and the SMEs in particular. In this study we have identified important eco-innovation patterns across the whole sample of firms and the SMEs. Small variations are visible across different firm sizes. One of the main findings is about the predominance of technological eco-innovation across firms, and particularly process eco-innovation that is practiced by around 50% of the SMEs. Simultaneously, product eco-innovation is practiced by around 40% of the SMEs. In relation to the modes of innovation there is still a significant percentage of firms that do not adopt any innovation mode (20% across the whole sample and 22% across SMEs). A tiny percentage adopts the STI innovation mode (9%) while the expected majority adopts the DUI mode (32% across SMEs). A very interesting outcome however is that a significant proportion of firms and SMEs are already implementing the STI&DUI mode together (36% of SMEs). In the econometric analysis this combined mode is the most effective across all types of innovation output. These findings show the yet extreme heterogeneity of firm/SME behavior in relation to the new environmental objectives set by the Paris 2016 and COP26 Agreements on Climate Change 2016, and the United Nations Development Goals (Daddi et al., 2012; Marin et al., 2015; Del Rio et al., 2017).