The drivers of eco-innovation and its impact on performance: Evidence from China

This study sheds light on the driving forces of eco-innovation and the effects on firm performance. We focus on eco-innovation, which provides customer and business value, and contributes to sustainable development while decreasing environmental costs and impacts. The study uses data collected from 442 Chinese firms to investigate the relationship among the drivers, eco-innovation behavior, and firm performance. The results reveal that certain factors (i.e., technological capabilities, environmental organizational capabilities, a market-based instrument, competitive pressures, and customer green demand) contribute to the development of eco-innovation. Competitive pressure provides firms with the greatest incentive to adopt eco-innovation, followed by a market-based instrument, technological capabilities, customer green demand, and environmental organization capabilities. The market-based instrument is effective in inducing eco-innovation, while a command and control instrument does not. With regard to the adoption of eco-innovation, we show that eco-innovation behavior can significantly enhance a firm's environmental performance, and, through environmental performance, has an indirect positive impact on its economic performance. These findings support the “Porter hypothesis,” and have several implications for both policy makers and business managers.