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The Nexus between Proactive Eco-Innovation and Firm Financial Performance: A Circular Economy Perspective

Author

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  • Satirenjit Kaur Johl

    (Department of Management and Humanities, Universiti Teknologi PETRONAS, Seri Iskandar 32610, Malaysia)

  • Md Abu Toha

    (Department of Management and Humanities, Universiti Teknologi PETRONAS, Seri Iskandar 32610, Malaysia
    Business Studies Group, Department of Accounting, National University, Gazipur 1704, Bangladesh)

Abstract

Eco-innovation has gained considerable attention in the academic and corporate world due to its potential in mitigating a firm’s sustainability issues. Most previous studies focused on the reactive approaches of eco-innovation using primary data. This study mitigates the existing research gap by highlighting proactive eco-innovation and using a secondary panel dataset. The prime objective of this study is to investigate the relationship between proactive eco-innovation and firms’ financial performance. Hence, the study will introduce the proactive eco-innovation index with the help of secondary panel data. In addition to that, the paper will also explore how proactive eco-innovation relates to circular economy. The theory of Resource-Based View (RBV) was used to explain the relationship among the variables. This study was conducted on 31 Malaysian public listed energy companies from 2015 to 2019. A proactive eco-innovation index was inferred by adapting three dimensions of eco-innovation (product, process, and technology) which is applicable for the energy sector. By applying random-effects GLS regression equation modeling, it was found that proactive eco-innovation (product eco-innovation, process eco-innovation, and technology eco-innovation) has a direct effect on firm financial performance. Furthermore, product and process eco-innovation is directly related to a circular economy through a sustainable product development process. The findings suggest that policymakers in the firm should proactively adopt eco-innovative practices. It will positively affect the circular economy as it will be cost-effective and help to reduce potential industrial pollution in the environment.

Suggested Citation

  • Satirenjit Kaur Johl & Md Abu Toha, 2021. "The Nexus between Proactive Eco-Innovation and Firm Financial Performance: A Circular Economy Perspective," Sustainability, MDPI, vol. 13(11), pages 1-25, June.
    • Handle: RePEc:gam:jsusta:v:13:y:2021:i:11:p:6253-:d:567122
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    References listed on IDEAS

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    2. Qinghua Fu & Muhammad Safdar Sial & Muhammad Zulqarnain Arshad & Ubaldo Comite & Phung Anh Thu & József Popp, 2021. "The Inter-Relationship between Innovation Capability and SME Performance: The Moderating Role of the External Environment," Sustainability, MDPI, vol. 13(16), pages 1-14, August.
    3. Parvez Alam Khan & Satirenjit Kaur Johl & Shakeb Akhtar, 2021. "Firm Sustainable Development Goals and Firm Financial Performance through the Lens of Green Innovation Practices and Reporting: A Proactive Approach," JRFM, MDPI, vol. 14(12), pages 1-23, December.
    4. Lingli Qing & Dongphil Chun & Abd Alwahed Dagestani & Peng Li, 2022. "Does Proactive Green Technology Innovation Improve Financial Performance? Evidence from Listed Companies with Semiconductor Concepts Stock in China," Sustainability, MDPI, vol. 14(8), pages 1-20, April.
    5. Ahmad Ali Jan & Fong-Woon Lai & Muhammad Umar Draz & Muhammad Tahir & Syed Emad Azhar Ali & Muhammad Zahid & Muhammad Kashif Shad, 2022. "Integrating sustainability practices into islamic corporate governance for sustainable firm performance: from the lens of agency and stakeholder theories," Quality & Quantity: International Journal of Methodology, Springer, vol. 56(5), pages 2989-3012, October.
    6. Fabio De Felice & Antonella Petrillo, 2021. "Green Transition: The Frontier of the Digicircular Economy Evidenced from a Systematic Literature Review," Sustainability, MDPI, vol. 13(19), pages 1-26, October.
    7. Holger Raúl Barriga Medina & Ruben Guevara & Ronald Enrique Campoverde & Milton Ismael Paredes-Aguirre, 2022. "Eco-Innovation and Firm Performance: Evidence from South America," Sustainability, MDPI, vol. 14(15), pages 1-14, August.
    8. Pruethsan Sutthichaimethee & Chanintorn Jittawiriyanukoon, 2022. "The Impact of Causal Factors Relationship over the Changes in Future Scenario Management under the Sustainability Policy of Thailand," International Journal of Energy Economics and Policy, Econjournals, vol. 12(5), pages 36-46, September.

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