Firm technological trajectory as a driver of eco-innovation in young small and medium-sized enterprises

Few studies have focused on green innovation in young small and medium-sized enterprises. Instead, research tends to focus on large companies with formal research and development departments, studying the influence of the firm's current technological strategy as well as the regulatory framework as a key driver of eco-innovation. This paper proposes that the combination of a firm's technological trajectory and its current research and development strategy are key determinants of eco-innovation. The authors investigate these relationships with panel data on 212 young firms in Spain, analysing their innovation strategy and behaviour during their first 10 years of activity. The results show that the firms cluster into four technological trajectories, but only “market-oriented innovators” engage significantly more in eco-innovation. These firms are characterized by a high use of formal appropriability mechanisms, market opportunity recognition arising from cooperation and high knowledge cumulativeness. This paper sheds light on whether and the extent to which a firm's technological trajectory is a driver of eco-innovation. It confirms that firms that search for opportunities and have a continuous collaboration with market players are more prone to develop eco-innovations. Additionally, it shows that path dependence occurs in the development of eco-innovations, in that a highly developed innovation capacity leads to additional green-innovation in the future. The findings indicate that young small firms need to develop innovation capabilities that also enable them to adopt advanced technology before striving to become greener. The paper concludes that policies designed to stimulate cooperative networking with other market players, an upgrading of technological capabilities, and the adoption of new technologies are all desirable because they contribute to improving the environmental impact of firms' innovations.