The financial performance of green prospector firms: a contingent approach
Innovation is central to improving economic productivity, human well-being and environmental conservation. Firm-level green innovation includes technological improvements that save energy, prevent pollution, or make it possible to recycle waste. Such innovation also includes green product design and corporate environmental management. This type of innovation contributes to business sustainability as it potentially has a positive effect on the firms’ financial, social and environmental outcomes. However, the specific effect of green innovation on firms’ outcomes can be highly influenced by the context in which firms develops their activities. Using a contingent approach and employing a sample of 88 green prospector firms from 14 different countries, we observe that the intensity of green innovation is positively related to firm profitability. We also show that stringent environmental regulations keep firms from taking the financial advantage of the benefits of green innovation. However, the environmental normative conditions in a country do not have any significant impact on the way firms take advantage of green innovation to increase their level of financial performance. Finally, we also discuss implications for academia, managers and policy-makers.
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