Unlocking Eco‐Innovation Potential: An Integrated Approach to Sustainability

Eco‐innovation has emerged as a pivotal strategy for addressing global environmental challenges, yet questions remain about its mechanisms and impact. Building on the innovation process and the Crépon, Duguet, and Mairesse (CDM) model, this study utilizes a quantitative methodology (Heckman correction and Probit method) to empirically examine the relationship between environmental purpose and the development of technological eco‐innovation in firms operating within a developing economy. Our findings provide robust empirical evidence that a heightened level of declared environmental purpose is significantly associated with the pursuit of technological eco‐innovation. Notably, the magnitude of this relationship differs across innovation types: while firms with high environmental purpose tend to engage in both product and process eco‐innovation, the effect is, particularly, pronounced for product innovations. Moreover, our analysis reveals that firms with elevated environmental purposes generally invest less intensively in research and development (R&D), suggesting a differentiated innovation strategy. Within the basic CDM framework, we identify the key inputs driving both R&D investment and technological eco‐innovation. Extending the model further, we explore the inputs influencing the level of environmental purpose assigned by firms in the context of eco‐innovation. Overall, our study contributes to the literature by quantifying the differential impacts of environmental purpose on eco‐innovation and elucidating the interplay between R&D intensity and environmental commitment in fostering innovation within a developing economy.