The Greening of Organizations
What determines environmental innovativeness in the Netherlands?
M.L. van Os, September 2013
Abstract
This research examines the determinant factors of environmental innovativeness in the Netherlands. It is being assessed whether regulatory, market, and firm-internal determinants have a positive effect on a firms’ environmental innovativeness. To test the model, 174 firms based in the Netherlands participated in a questionnaire. Regression results show that the firm-internal determinants green capabilities and
general innovativeness have a significantly positive effect on a firms’ environmental innovativeness. Stringency of regulation also appears to have a significantly positive effect. No evidence is found for the
effects of predictability of regulation, customer demand, and customer benefits.
Keywords: Environmental innovation, green innovation, ecological innovation, regulatory forces, market
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The Greening of Organizations
What determines environmental innovativeness in the Netherlands?
Master Thesis
MSc Business Administration – Strategy and Innovation
Faculty of Economics and Business
University of Groningen
Groningen, 17th of September 2013
Supervisor: Dr. R.A. van der Eijk
Second Supervisor: Dr. T.L.J. Broekhuizen
Michelle van Os – Student number 1689746
Oostersingel 114, 9711 XH Groningen
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PREFACE
This master thesis represents the final chapter of my six years as a student in Groningen and is the very last step in obtaining my master’s degree in Business Administration, with a specialization in Strategy and Innovation. I have really enjoyed my years as a student, and I hope I can put everything I learned from these years in practice in a challenging job.
I am grateful for all the 220 firms that responded to my questionnaire and made this research possible. Without their time and effort, this thesis would not be lying in front of you.
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EXECUTIVE SUMMARY
In the past decade, climate change and other environmental issues have made people aware of the fact that economic growth also has its downsides. Concern for the environmental has become a social trend reflected in the attitudes and behavior of both consumers and firms. Consumers are more and more willing to purchase environmentally friendly goods and services, and firms are increasingly working on creating a “green” image. In addition, governments and policy makers constantly face the challenge of reducing the environmental burden, and they are looking for ways to overcome this by for example regulating firms. The growing environmental burden and with that the increasing amount of environmental regulations has forced firms to change their business models. Firms are increasingly adapting to opportunities that make their businesses less harmful to the environment, resulting in the development of environmental innovations.
Environmental innovation is a broad concept, and therefore it has been termed in many different ways. The terms environmental innovation, green innovation, eco-innovation, sustainable innovation, and environmentally driven innovation all share a somewhat similar definition. Environmental innovations encompass all innovations that have a beneficial effect on the environment, and are also novel to the firm that introduces them.
In the 1990’s, Porter and van der Linde were the first to claim that environmental regulations can actually induce innovation by making firms aware of otherwise unexploited opportunities. This would eventually result in environmental benefits and increased competitiveness. Their statement spurred an amount of research on the influence of regulation on environmental innovations. Regulation was long considered as the only important determinant of environmental innovation and many other non-regulatory determinants have been left out of a lot of research. However, firms usually make decisions with a full consideration of all factors. Therefore, other conditions would almost certainly also determine a firms’ environmental innovativeness.
Against this assumption this thesis examined the conditions that influence firms’ environmental innovativeness. It combines perspectives from the fields of strategic management, environmental economics, and industrial economics to examine which factors determine environmental innovativeness in the Netherlands. Based on the different fields of literature, a theoretical framework was developed that included regulatory, market, and firm-internal determinants of environmental innovativeness. The empirical analysis was conducted with a sample from firms in the Netherlands.
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by firms. Results revealed that for determining environmental innovativeness, firm-internal conditions were the most important. The presence of green capabilities, and with that the implementation of an Environmental Management System seems to be the most important condition influencing a firms’ environmental innovativeness. Another firm-internal determinant, R&D investments as a proxy forgeneral innovativeness, also had a positive effect on the number of environmental innovations developed
by firms. Furthermore, the results showed that the condition stringency of regulation positively influenced environmental innovativeness. However, in contrast to the hypotheses, predictability of regulation,
customer demand, and customer benefits did not show a significant relationship. Another notable result is
that the control variable presence of networks seemed to have a large significant effect on the number of environmental innovations developed and commercialized by firms.
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TABLE OF CONTENTS
PREFACE ... 2 EXECUTIVE SUMMARY ... 3 1. INTRODUCTION ... 7 1.1 Research Question ... 81.2 Scope and Domain of Research ... 9
1.3 Contribution ... 9
1.4 Outline of the study ... 9
2. LITERATURE REVIEW ... 11
2.1 Defining Environmental Innovation ... 11
2.2 Existing literature ... 12 2.3 Underlying theories ... 15 2.4 Regulatory determinants ... 15 Stringency of Regulation ... 17 Predictability of Regulation ... 18 2.5 Market Determinants ... 19 Customer Demand ... 19 Customer Benefits ... 20 2.6 Firm-Internal Determinants... 21
General Innovativeness/ R&D Intensity ... 21
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3.6 Validation ... 32
4. RESULTS ... 35
4.1 Means, Standard Deviations and Correlations ... 35
4.2 Regression Results ... 37
5. DISCUSSION ... 41
6. CONCLUSIONS, LIMITATIONS AND FURTHER RESEARCH ... 44
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1. INTRODUCTION
Concern for the environment is a growing social trend reflected in the attitudes and behavior of both consumers and firms. Climate change and other environmental issues have made people aware of the fact that economic growth also has its downsides. Firms are increasingly recognizing that the environment is an important matter to both their customers and shareholders, and customers are gradually more willing to purchase products that are not harmful to the environment. Additionally, governments and policy makers are constantly facing the challenge of reducing the environmental burden. Due to this environmentalism and the emergence of environmental regulations, companies need to change their business models in order to adapt to green opportunities (Chen and Chang, 2012). Because environmental concern has rapidly become an issue, more companies would like to utilize green opportunities. A possible solution for overcoming the environmental burden is the development of environmental innovations.
In recent years, environmental innovation has received much attention. However, the values and meaning of the term environmental innovation are not always clear. Environmental innovations encompass all innovations that have a beneficial effect on the environment, and are also novel to the firm that introduces them (OECD, 2008). Many scholars have addressed the advantages of developing environmental innovations. According to Nidumolu et al. (2009), making operations sustainable and developing green products gives companies a competitive advantage. Additionally, these authors show that sustainability and the development of green products are the drivers of organizational and technological innovations that turn out to be successful. Becoming environmentally-friendly can reduce costs for companies because they may end up reducing the inputs they use. Developing and commercializing environmental innovations can also generate additional revenues from better products and it enables companies to create new businesses (Nidumolu et al., 2009).
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The debate about the relationship between economic growth and the environmental burden has already been going on for a number of years. In 1995, Porter and van der Linde (1995a) introduced the “win-win hypothesis” by means of arguing that environmental regulation could induce innovation by making industries aware of otherwise unexploited opportunities. They stated that this would result in environmental benefits and increased competitiveness. The statement they made has stimulated an amount of research on the influence of regulation on environmental innovativeness. However, other (non-regulatory) determinants of environmental innovation have been left out of a lot of research, and most of the recent scholars merely concentrate on single factor’s influence on environmental innovation. Nonetheless, firms usually make decisions with a full consideration of all factors. So far, empirical analyses on the determinants of environmental innovativeness are still scarce. Thus, an integrated approach considering all determinant factors of environmental innovativeness is needed.This paper seeks to identify the determinant factors of environmental innovativeness of firms in the Netherlands. The existing literature on this subject suggests that regulatory, technology push, and market pull determinants affect environmental innovation. Some scholars approach it from a customers’ viewpoint and their preferences; others focus on the more economic drivers of green innovation. This paper combines standpoints from the fields of strategic management, environmental economics, and industrial economics to examine what factors determine environmental innovativeness in the Netherlands.
1.1 Research Question
The current literature on environmental innovation suggests that the decision of a firm to engage in environmental innovations is determined by factors from different fields of research. The focus of this research is on finding out which conditions generate the development and commercialization of environmental innovations. Therefore, the goal of this research is to develop and test a framework that examines which determinants influence environmental innovativeness in the Netherlands. The central research question is stated as follows:
What determines a firms’ environmental innovativeness in the Netherlands?
To answer the central research question several sub questions are created. The Sub-questions are formulated as follows:
1. How can environmental innovation be defined?
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5. To what extent do firm-internal conditions influence firms to engage in environmentalinnovation?
1.2 Scope and Domain of Research
The scope of this research extends to industries in the Netherlands that are known for coping with environmental issues. This research includes industries that are mainly focused on production and manufacturing, since environmental regulation usually affects these industries (Kammerer, 2009). Large manufacturers and industrial firms are often big polluters that cope with environmental regulations and abatement costs that largely influence their businesses. Therefore, it is likely that those firms look for opportunities to avoid the costs of abatement, often resulting in the development of environmental innovations (Greenstone et al., 2012). Next to the manufacturing and producing industries, the energy, information & communication, and research industries are also included in this research. Many smaller firms engaging and specialized in environmental innovation operate in one of those industries, making them useful to incorporate in this research.
1.3 Contribution
This research incorporates viewpoints from several fields of research. It contributes to the literature by creating an integrated theoretical model for determining environmental innovation. Furthermore, the dependent variable environmental innovation activity is measured in a different form than in most other innovation studies. The existing literature usually measures environmental innovation in a binary way, by using patent data, or by using R&D expenses as a proxy for innovation. However, the patenting of an invention does usually not mean that this invention is actually commercialized, and R&D does not always lead to innovation either (Jaffe and Palmer, 1997). This research measures environmental innovativeness by surveying the number of environmental innovations commercialized in a certain period of time. Using the number of innovations as the dependent variable allows for a more direct measurement of the relationship between the several determinants and environmental innovativeness.
Additionally, in contrast to other studies, this research uses a more firm-focused approach of surveying. Many other studies use large-scale “general” innovation questionnaires without a specific focus on environmental innovation. The questionnaire for this study was principally developed for this research, and distributed through a more personal way, allowing for response from relevant managers.
1.4 Outline of the study
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2. LITERATURE REVIEW
2.1 Defining Environmental Innovation
As stated before, the concept of environmental innovation has been termed in many different ways. The terms environmental innovation, green innovation, eco-innovation, sustainable innovation, and environmentally driven innovation all share a somewhat similar definition. There are several somewhat similar definitions of environmental innovation. Kemp and Pearson (2008) define environmental innovation as “the production, assimilation or exploitation of a product, production process, service or management or business method that is novel to the firm and which results, throughout its lifecycle, in a reduction of environmental risk, pollution and other negative impacts of resource used compared to relevant alternatives”. Rennings (2000) states that compared to “standard” innovation, the additional distinguishing attribute of environmental innovations is that “they reduce environmental burdens at least in one item and, thus, contribute to improving the environmental situation”.
In this research, the definition for environmental innovation from the Organization for Economic Co-operation and Development (OECD, 2008) is used. The OECD definition covers most important characteristics of environmental innovation. According to the OECD (2008), green or environmental innovations “encompass all innovations that have a beneficial effect on the environment, regardless of whether this effect was the main objective of the innovation, and that are also novel to the firm that introduces them. They include process, product and organizational innovations”. The OECD (1997) also categorized environmental innovations, and describes the different types of environmental innovation as:
Environmental process innovations are defined as improvements in the production process resulting in reduced environmental impacts.
Environmental product innovations aim to reduce environmental impacts during a product’s entire life cycle.
Environmental organizational innovations do not reduce environmental impacts directly, but facilitate the implementation of technical (process and product) environmental innovations in companies.
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An important characteristic of environmental innovations is their “double externality”, which can be used to differentiate environmental innovations from standard innovations. According to Rennings (2000), double externality means that “next to the positive spillovers which are common to all innovations, environmental innovations have the characteristic of leading to a reduction of external environmental costs as a negative externality”. Thus, while the whole society benefits from an environmental innovation, the costs of that innovation have to be covered by a single firm. Assuming that an environmental innovation is successfully marketed, it might still be hard for the firm that developed it to appropriate profits from the innovation (Rennings, 2000).There has been discussion about whether environmental innovation can be considered as “standard” innovation or if a specific theory is needed (Rennings, 2000). Magnusson (2003) argues that the existing theory on “standard” innovation is useful to understand and research the concept of environmental innovation. However, theories of general innovation emphasize purely on the relevance of market pull and technology push factors for the explanation of innovation incentives (Hemmelskamp, 2000). Therefore, other authors suggest that the standard innovation literature is not sufficient to analyze environmental innovation (Hellstrom, 2006). Horbach (2008) for example argues that there exist some specific incentives for environmental innovations, such as institutional and political factors.
2.2 Existing literature
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innovation. Bernauer et al. (2006) argue that because environmental innovations are carried out at the firm level, it would be useful to change the focus from the sector level to the firm level.In order to find out which determinants are important for developing of environmental innovations, determinants used in previous research are summed up in table 1.
Table 1: Determinants of environmental innovation derived from literature Reference Targeted firms/industries Type of Innovation Focus on Category of determinants Specific Drivers Cleff and Rennings (1999) German manufacturing sector Product and process Technology push, Regulatory push/pull, Market pull Technology:
Material efficiency, product quality, product palette, energy efficiency
Regulatory:
Environmental law, standards, expected regulation
Market:
Market share, competition, customer demand, image, labor costs, new markets
Horbach (2007)
The environmental sector in Germany
Product Supply side, Demand side, Institutional and political influences Supply: Technological capabilities, appropriation problem, market characteristics
Demand:
(expected) market demand, social awareness of the need for environmental products
Institutional and political:
Environmental policy, institutional structure (e.g. political opportunities of environmentally oriented groups, organization of information flow, innovation networks) Rehfeld, Rennings and Ziegler (2007) German manufacturing sector Product Environmental policy, Technology push, Market pull, other firm
characteristics
Specific focus on Integrated Product Policy (IPP) by the European Commission:
Environmental criteria,
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Kammerer (2009) German electrical and electronic appliances (EEA) industry Product Regulation, Customer benefits, Green capabilities Regulation:4 specific issues: energy efficiency, toxic substances, material efficiency, and electromagnetic fields.
Customer benefits:
e.g. energy savings
Green capabilities:
EMAS/ISO Johnstone et
al. (2010) – OECD paper
OECD patent data Environment al
technologies
Environmental policy
Stringency, predictability, flexibility, incidence and depth of policy instruments Hemmelska mp (1997) Based on several empirical studies Product and process Environmental policy Policy instruments:
Requirements, levies, permits, liability laws, eco-audit regulation Lefebvre et al. (2003) Canadian SMEs in four industries: wood products industry, printing industry, fabricated metal products industry, electric and electronic products industry Product and process Firms’ characteristics, Products’ characteristics, Drivers of change Firm characteristics: Size, R&D intensity/aggressiveness of technology policy, TQM, ISO
Product characteristics:
Consumer good, final product, life expectancy, whether it is sold on foreign markets, level of customer sophistication
Drivers of change:
Pressure groups, legislation, market opportunities Jaffe and Palmer (1997) PACE survey – industry level Product and process
Regulation Stringency of regulation
Findings: Compliance costs have a positive effect on R&D expenditures but not directly on inventive output Wagner (2008) 9 European countries Product and process
EMS and other management activities
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2.3 Underlying theories
To create a comprehensive framework for the determinants of environmental innovativeness, several underlying theories from the general innovation literature are addressed. These theories form the basis on which is decided which variables are used in this study. The first general innovation theory used is the
neoclassical theory. According to neoclassical economists, innovation is triggered by market pull and
technologies push factors (Pavitt, 1984). Neoclassical economists consider market pull factors (i.e. customer demand, competition, etc.) as an important source of change in firms. Therefore, market determinants of environmental innovativeness are included in this research. A second theory is the
Schumpeterian theory. Schumpeter considers innovation as an endogenous process, driven by the firm
itself (Scherer, 1986). Accordingly, firm-internal determinants are integrated in this research. A third theory that is consulted in this research is the evolutionary theory. Evolutionary theory is based on the principle of “satisficing”, which means that firms do not change (e.g. innovate) unless they are forced to by exogenous factors. This research also builds on this theory, by incorporating exogenous regulatory determinants in the framework for the determinants of environmental innovativeness.
2.4 Regulatory determinants
The belief that environmental regulation can motivate firms to develop and commercialize environmental innovations has been analyzed by several researchers (Porter and van der Linde, 1995; Rennings and Ziegler, 2004; Gouldson and Murphy, 1998). Environmental regulation is defined as “the full range of legal instruments by which governing institutions, at all levels of government, impose obligations or constraints on private sector behavior. Constitutions, parliamentary laws, subordinate legislation, decrees, orders, norms, licenses, plans, codes and even some forms of administrative guidance can all be considered as regulation” (OECD, 1997a). Evidence that environmental regulation motivates firms to engage in environmental innovation has largely been derived from case studies. This is mainly due to the fact that it is difficult to find appropriate indicators for measuring environmental regulation (Rennings, 2000). Most studies measure environmental regulation by using regulatory compliance expenditures, which seems to be the only comprehensive measure of environmental regulation. However, this measure fails to provide an accurate measure since the level of these costs also depends on the nature of an industry’s response to environmental regulation (Rennings, 2000).
According to Hemmelskamp (1997), regulation instruments regarding the environment can be divided into two subcategories:
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Market instruments that indirectly control firms’ processes through the information and controlfunction of prices. They include permits, levies, subsidies, compensations, residual pollution levies or the privatization of environmental media.
In 1995, Porter and van der Linde claimed that properly structured environmental regulations not only benefit the environment, but also benefit the industries that are regulated, by making firms realize otherwise neglected investment opportunities (Porter and van der Linde, 1995a). With their “win-win” hypothesis, the authors argue that environmental regulation and the compliance costs associated with regulation can force industries and firms to innovate and increase their productivity and resource efficiency. By using evidence from case studies, Porter and van der Linde (1995a) argue that environmental regulations induce firms to develop innovations that are not only beneficial to the environment, but also have positive effects (the so called “innovation offsets”) on productivity. The authors state that environmental regulation that is appropriately constructed has several advantages. First, regulations can signal companies about their current resource inefficiencies and possible technological improvements. Second, regulation that is focused on the gathering of information (about for example the emission of toxic chemicals) can raise corporate awareness. Third, regulations can decrease the uncertainty that a lot of firms face about the valuableness of environmental investments. Finally, regulation creates an outside pressure that motivates innovation.
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and costs to determine the attractiveness of environmental innovations, and not only look at the benefits for society. Other scholars do agree with the win-win hypothesis. Bernauer et al. (2006) suggest that environmental regulations can push innovations that have no sufficient market pull or technology push effects. Furthermore, Hemmelskamp (1997) investigated the impact of several attributes of environmental regulation on environmental innovation activity. His results suggest that regulations do in fact influence a firm’s environmental performance. However, the effects of regulatory policies in practice differ from the ideal policies analyzed in theoretical studies.Bernauer et al. (2006) propose that there are two aspects of environmental regulation that may have an effect on environmental innovation: stringency and predictability of regulation. According to Kesidou and Demirel (2012), differences in the levels of stringency and predictability of regulation across countries go together with different levels of environmental innovations. The effects of stringency and predictability of regulation on environmental innovativeness are described below.
Stringency of Regulation
Stringency of regulation can be measured by how much change environmental regulation generates in a certain firm (Bernauer et al., 2006). According to Ashford et al. (1985), regulation is seen as stringent if regulation requires a firm to significantly reduce its toxic substances, if compliance costs for using the existing technology are too costly for a firm, or if compliance costs require a significant change in technology. The degree of stringency of certain regulations depends on policy makers and governments, and how their viewpoint against reducing the environmental burden is (Ashford et al., 1985). In theory, more stringent environmental regulation can induce environmental innovativeness. A more stringent regulation policy will provide greater incentives for companies to search for ways to avoid the costs enforced by the policy (Barrett, 1991). Therefore, a more stringent regulation policy will force firms to evaluate their existing practices and come up with solutions that for example reduce their toxic substances.
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R&D expenditures as a proxy for innovation. Since there is theoretical support for the fact that the stringency of regulation positively affects environmental innovativeness, the following is hypothesized:H1a: Stringency of environmental regulation positively affects a firms’ environmental innovativeness
Predictability of Regulation
Predictability of regulation is described as the degree to which future regulation and its properties can be foreseen (Bernauer et al., 2006). Innovation processes usually involve uncertainties and risks, and innovation strategies usually require a long term planning horizon. Investments in R&D are by nature risky and the outcomes of these investments are often uncertain. This is due to the fact that investments in R&D are irreversible since sunk costs cannot be returned if for example market conditions change (Johnstone et al., 2010). Predictability of regulation can reduce uncertainty for firms. Uncertain signals about environmental regulations will give firms and investors reasons to delay investments that could lead to innovation. If the future regarding the costs associated with regulations is unpredictable and uncertain, firms may decide to wait before they carry out R&D investments which may lead to environmental innovation. Therefore, the predictability of regulation can play an important role in inducing environmental innovation (Johnstone et al., 2010).
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According to the literature, firms will have higher levels of environmental innovativeness if the environmental policy regime in a certain industry or country is predictable and certain. Therefore, the following is hypothesized:H1b: Predictability of environmental regulation positively affects a firms’ environmental innovativeness
2.5 Market Determinants
Literature on innovation has long centered on the drivers of technological innovation. Research on this topic has mainly been focused on whether technology-push or market-pull factors are more important drivers of technological innovation. Market pull factors are for example competitiveness and customer demand. Technology push factors can for example be product quality and efficiency (Pavitt, 1984). Schmookler (1966) examined the effect of market pull factors and concluded that these factors are the major determinants of changes in the allocation of innovative effort. On the contrary, Rosenberg (1974) argues that the main driving forces of development are new technological opportunities. According to Pavitt (1984), both technological development (technology push) and market demand (market pull) are important drivers of technological innovation. Technology factors seem to be more important in the early stages of the life cycle of an innovation, and market pull factors seem to be more important for the further diffusion of an innovation. However, these factors appear to be important for “standard” innovation. Concerning environmental innovation, Cleff and Rennings (1999) argue that new environmentally efficient technologies are mostly subject to technology push factors, while preferences for environmentally friendly products are mostly subject to market pull factors. In determining the factors that influence environmental innovation activity, the focus will be on determinant conditions from the industrial organization literature. The conditions customer demand and customer benefits are described below.
Customer Demand
Many studies from the “general” innovation literature stress the critical role of demand pull factors for innovation. Around 1980, the generally accepted linear model of innovation was replaced by new insights that emphasized the feedback mechanisms from the innovation process (Kline and Rosenberg, 1986). Several studies stressed that not only producers participate and shape the innovation process, but that consumers and users are also playing an increasingly important role (Von Hippel, 1987).
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studies analyzed the effect of customer demand on environmental innovations. Kesidou and Demirel (2012) examined how several factors such as customers’ demand and the adoption of policies affect the decision of firms to invest in environmental R&D. Their findings suggest that demand factors such as customer requirements and Corporate Social Responsibility are important initiators of environmental innovation. However, factors such as regulations and the presence of organizational capabilities are still of more importance. On the other hand, Horbach et al. (2011) examined the effect of customer demand in the energy industry and found that customer demand is one of the main reasons for firms in this industry to “go green”. Other scholars also argue that market forces alone provide insufficient incentives for firms to engage in environmental innovation since the willingness from consumers to pay for environmental improvements is still too low (Oltra and Saint Jean, 2009). Another notable finding by Kesidou and Demirel (2012) is that firms often invest a minimum amount of money in environmental activities, to ensure their green image is guaranteed. Nevertheless, these minimum investments often do not lead to environmental innovations, since larger amounts of resources are needed for that. Accordingly, this would mean that customer demand for environmental products does not necessarily lead to more environmental innovations.Since an increasing amount of customers is taking the environment into account when purchasing goods or services, hypothesized is whether customer demand for environmentally friendly innovations will affect a firms’ environmental innovativeness.
H2a: Customer demand for environmentally friendly innovations positively affects a firms’ environmental innovativeness
Customer Benefits
Literature suggests that customer demand for environmentally friendly innovations will be stronger if these goods or services, besides their public benefits, also have private benefits for consumers (Reinhardt, 1998). The argument is that environmental innovations which besides their public benefits have private environmental benefits for the customer, will generate stronger consumer demand and can thus the motivate firms to carry out those innovations (Kammerer, 2009). Such private customer benefits can for example be cost and energy savings through more efficient appliances, improved durability, improved quality, easier or better disposal possibilities, and reduced health impacts (Kammerer, 2009). By shifting some of the environmental benefits from the public to the consumer, companies can deliver added value, and thereby increasing their demand for environmentally improved products (Kammerer, 2009).
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private environmental customer benefits. Results from their case study show that success of an environmental label is to be expected particularly for those products where the individual consumer can expect a personal positive advantage by utilizing the product. Visible customer benefits seem to create incentives for companies to implement environmental innovations in the first place. Since companies are expected to focus their environmental innovation efforts on improved products with distinct environmental customer benefits, the following is hypothesized:H2b: Visible customer benefits of a firms’ offering positively affect a firms’ environmental innovativeness
2.6 Firm-Internal Determinants
Regulatory factors and market factors that influence a firm’s environmental inoovativeness are often complemented by other firm-internal determinants. These firm-internal characteristics lead to different starting conditions of firms in terms of their environmental innovation activities (Pereira and Vence, 2012). Firm-internal conditions are often evaluated using the resource-based view of the firm (Barney, 1991). According to Fagerberg et al. (2005), the resource-based view in this case means that firm-internal characteristics such as structure, core competences, capabilities and strategy are important determinants of innovation. The focus is on two firm-internal characteristics: R&D/general innovativeness and green capabilities.
General Innovativeness/ R&D Intensity
An important firm-internal capability for developing innovation is the effort a firm puts into Research and Development. R&D is defined as any internally or externally funded activity designed to develop new technologies or improve a firm’s products or services (McKinley et al., 1991). Investment in R&D is one of the main conditions to develop innovations and acquire new knowledge (Pereira and Vence, 2012). R&D may not inevitably lead to innovation, but it is still the most commonly used strategy aiming at innovation. Several researchers have found evidence that R&D intensity is an important predictor of innovation (Clark, 1987; Cooper and Smith, 1992). Research shows that firms with a high level of R&D intensity are more committed to innovation compared to firms with low R&D intensity (Clark, 1987; Cooper and Smith, 1992). Therefore, R&D intensity is often used as a proxy for innovation.
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introduction of environmental product innovations within firms. However, other scholars find weaker results concerning the relationship between R&D intensity and environmental innovation. Kammerer (2009) finds no significant relationship between firms’ R&D activities and the introduction of environmental product innovations.The underlying theory is that firms that are innovative in general, would also be more likely to engage in environmental innovation. Firms that are aiming to be innovative usually have strategies focusing on R&D. A commitment to innovation and R&D will likely also have an impact on environmental innovation, since a research orientation is expected to lead to new knowledge and ideas, also concerning environmental issues (Horbach, 2008).
Since many scholars have proven that R&D intensity has a positive effect on “general” innovativeness, it is expected that this relationship also counts for environmental innovativeness. Therefore, hypothesized is:
H3a: General innovativeness/R&D intensity positively affects a firms’ environmental innovativeness
Green Capabilities
The innovation literature suggests that a growing amount of investments in environmental innovation are influenced by the internal capabilities of firms (Kemp et al., 1992). Kammerer (2009) identifies these capabilities as “green capabilities” and argues that green capabilities positively influence the development of environmental innovations. Several studies show that firms that build green organizational capabilities such as recycling, pollution prevention, source reduction and green product design are more likely to invest in environmental innovation (Florida et al., 2001; Georg et al., 1992; Wagner, 2007). Other examples of green capabilities are the consideration of environmental criteria in product planning and development, life cycle assessment activities of products, ecological labeling, provision of information, benchmarking, and so on (Pereira and Vence, 2012).
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responsibilities for environmental issues, and have a plan to correct environmental problems (Potoski and Prakash, 2005b). EMAS stands for Eco-Management and Audit Schema and was introduced in 1993 by the European Commission. Firms in the Netherlands that are ISO or EMAS certified benefit from regulatory relief and have the opportunity to get higher subsidies based on the EMAS privilege regulation (European Commission, 2012).Thus, EMSs such as ISO/EMAS are standards related to environmental management that can help firms to minimize how their operations affect the environment. The theory is that EMSs such as ISO and EMAS instruct companies to establish environmental goals and management structures, thereby inducing companies to innovate in an environmental way (Johnstone, 2001). Several scholars found that EMS certification leads to higher profits and a better environmental performance (Porter and van der Linde, 1995; Melnyk et al., 2003). According to Johnstone (2010), ISO and EMAS can induce environmental innovations directly by instructing firms to create management structures and programs to achieve environmental goals.
However, the results on this subject are indefinite and there has been critical feedback on many of the management structures and tools proposed by EMS. For example, Theyel (2000) found that most firms do not implement EMS correctly and thus do not produce any actual environmental improvements. Even though most empirical research confirms that the implementation of EMS stimulates the development of “green” organizational capabilities, management research has shown that only external certification does not enhance environmental innovation. This is due to the somewhat pretentious implementation of EMS by some firms (Boiral, 2007; Russo and Harrison, 2005). To discover if the implementation of EMS by firms actually influences a firms’ environmental innovativeness, the following is hypothesized:
H3b: The presence of green capabilities positively affects a firms’ environmental innovativeness
2.7 Control variables
Firm Size2
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the necessary investments, the availability of more human resources, and a clearer internal organization. Larger firms can often count on responsible staff of specific departments that are orientated to R&D activities and environmental issues. Furthermore, large firms often have a larger portfolio of competencies (Baylis et al. (1998).Several scholars find that firm size has a positive influence on environmental innovation (Rehfeld et al., 2006; Cleff and Rennings, 1999). However, the results are not decisive. Demirel and Kesidou (2011) identify size as an important determinant related to investments in end of pipe technologies, but do not find size as an important determinant of investments in environmental R&D. Additionally, Demirel and Kesidou (2011) show that there is a significant relationship between investment in environmental R&D and firm size. They also find that there exists an U-shaped relationship between firm size and environmental innovation. This indicates that smaller firms and larger firms invest more in the concept of environmental innovation than medium sized firms. Wagner (2007) and Rennings et Al (2006) also identify size as an important determinant of environmental innovation, by measuring environmental innovation activity both by using patents and the number of commercialized innovations. Nevertheless, Frondel et al. (2008) studied the possible correlation between the adoption of environmental management systems (EMS) and innovation and found that size only effects the adoption of these systems, and not the innovation activity itself. Firm size in this research will be measured by the number of employees (FTE) and annual turnover.
Firm Age
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Type of IndustryInnovation in general is likely to be determined by the technological opportunities of the specific industry or sector (Vence and Pereira, 2012). According to Del Río (2009), to know more about the direction of environmental technological change it is important for firms to consider the technological maturity of the sector. The differences in technological change between industries and sectors can be linked to their innovative efforts, the degree of difficulty of learning of specific technologies, and the relationships between firms involved in a given sector (Vence and Pereira, 2012). Concerning environmental issues, it can be expected that industries dealing with more pollution tend to develop more innovations that reduce the environmental impact. Industries significantly differ among each other when it comes to environmental innovation. Sectors that produce final goods or services usually face environmental pressure from customers. Firms in those sectors can develop environmental strategies that improve social conditions by for example offering a green image of improving conditions for employees. Firms that produce goods or services for other sector however, face more environmental pressure from regulations (Vence and Pereira, 2012).
Several studies looking into the determinants of environmental innovation recognize the type of industry as a control variable. Kesidou and Demirel (2010) argue that the most important industries concerning environmental innovation are energy and water, fuel or coal, oil and nuclear and chemical products. Mazzanti and Zoboli (2006) concur with that and additionally find that the type of industry is a more important control variable in affecting environmental innovation than firm size. Frondel et al. (2008) use “abatement activities” as a proxy for environmental innovation and find that the most pollutant firms seem to carry out more environmental innovations. Horbach (2008) also finds a difference among industries and argues that for example the chemical industry – with a high polluting potential – undertakes more innovations with environmental effects. In addition, Horbach (2008) claims that firms belonging to sectors with high average sales of new products are more likely to innovate, either in an environmental or non-environmental way. Therefore, it can be argued that the type of industry highly affects the environmental innovation activity of firms within that industry.
Presence of networks
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Winston (2006), the shift of focus towards environmental innovation requires information, knowledge and participation from many different sectors, including firms, universities, governments, and non-governmental organizations. The OECD (2008:25) confirms this by stating that “it is generally agreed that many environmental problems require concerted action, international cooperation, and partnerships among countries, as the increasing number of multilateral environmental agreements and related initiatives show”. Additionally, the OECD (2008: 25) argues that in order to address global environmental problems, environmental innovation and technology development on a global scale is needed. Grant (2005) shares this belief and states that being a member of a network is one of the driving forces of successful R&D. Since R&D is known as one of the primary drivers of environmental innovation, there exists a causal relationship between networks, R&D, and innovations. Horbach et al. (2011) also confirm the importance of networks in environmental innovation and find that firms who actively innovate in an environmental way are more likely to cooperate with firms than other innovators. Since the being member of a network gives an advantage to environmentally innovative firms, this study uses “membership of a network” as a control variable.2.8 Conceptual Model
Based on the previously discussed literature, a conceptual model is created. In the literature review, six determinants that may affect a firm’s environmental innovation activity were found. Those six independent variables are assembled into three groups of determinants: regulatory, market, and firm-internal determinants. Control variables that could also influence a firm’s environmental innovation activity are also depicted in the conceptual model. A visual representation of the expected relationships between the hypothesized determinants and environmental innovativeness can be found in figure 1.
Figure 1: Conceptual model Regulatory Determinants
Stringency of Regulation (H1a) Predictability of Regulation (H1b)
Firm-Internal Determinants General Innovativeness (H3a) Green Capabilities (H3b)
Market Determinants Customer Demand (H2a) Customer Benefits (H2b)
Environmental Innovativeness
Control Variables Firm size, firm age, cooperative
networks, and industry +
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3. METHODOLOGY
3.1 Research Design
The goal of this research is to investigate what determines environmental innovativeness in the Netherlands. Based on the literature, a conceptual model (see chapter 2.7) has been created, which will be tested through statistical analysis. Since the goal of this research is to investigate “what” determines environmental innovativeness, a quantitative research approach is used. Most of the current knowledge on the drivers of environmental innovation comes from cases studies. Although case studies are useful to obtain in-depth information, these studies may not apply to the majority of firms. Quantitative testing allows for reliable and objective testing, with the opportunity to generalize findings. By executing a quantitative research, it is possible to approximate how much one variable is related to other variables. The specific quantitative approach used in this this research is survey research. Survey research provides estimates from a sample that can be related to the entire population with a degree of certainty. Thus, survey research is very appealing when sample generalizability is a central goal. Since the goal of this research is to generalize the outcomes of the analysis over the Netherlands, this research method works best. Furthermore, surveys are inclusive in the types and number of variables that can be studied, which is useful in this research since the survey includes questions of different types.
3.2 Data Collection
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sustainable industries in the Netherlands. Those industries associations keep member lists, which were used to distribute the survey. It is assumed that this is a representative sample of the environmentally innovative firms in the Netherlands. Table 2 shows a list of industry associations from which members were e-mailed with a request to participate in the survey.Table 2: Consulted Industry Associations
Industry Association Website
Federatie Technologie Branche www.fhi.nl
Dutch Material Handling www.dutchmaterialhandling.nl
Organisatie Duurzame Energie www.duurzameenergie.org
Federatie Nederlandse Levensmiddelen www.fnli.nl Vereniging Leveranciers Milieutechniek www.vlm.fme.nl
Holland Health Tech www.hollandhealthtech.nl
Foodvalley www.foodvalley.nl
Contactnet Duurzame Innovatie Noord-Nederland www.codin.nl
Lean & Green www.lean-green.nl
Duurzaam Gebouwd www.duurzaamgebouwd.nl
Cleantech top 100 www.cleantech.com
Syntens Innovatiecentrum www.syntens.nl
Federatie Elektrotechniek www.fedet.nl
The questionnaire targeted managers with knowledge of environmental issues and innovation, and consisted of five parts: 1) general information of the firm, 2) a firm’s environmental innovation activity, 3) questions related to regulation, 4) questions related to market factors, and 5) questions related to a firm’s internal characteristics such as environmental management systems. The questionnaire that was used can be found in appendix 1.
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(7.4%), electronics (7.4%), wood and paper (5.2%), energy (8%), and information and communication (5.2%).3.3 Measures
Dependent Variable:Environmental Innovativeness
The dependent variable in this research is environmental innovativeness. Prior studies that seek to identify the determinant factors of environmental innovation mostly use (environmental) patents or R&D activity as a proxy for environmental innovation activity. However, since both patents and R&D activities take place at the beginning of the innovation process and do not necessarily lead to innovation (e.g. the commercialization of the invention), they are an inadequate proxy for environmental innovativeness (Ziegler and Nogareda, 2009). The output of the process, namely the amount of product, process, or organizational environmental innovations seems to appear to be better indicator for environmental innovation activity. Therefore, environmental innovativeness is measured by the amount of environmental innovations a company has launched in the period between 2009 and 2012. Since the variable is time-dependent, the length of the observation period is important. A three-year time frame is chosen since The Communication Innovation Statistics survey (2006) also uses this time frame to construct survey items.
Independent Variables:
Stringency of Regulation
Stringency of regulation is measured by the degree of influence that regulation has on the firm where the respondent is working. Lefebvre et al. (2003) measure stringency of regulation by requesting respondents to indicate on a 7 point Likert scale whether the current policy regime has “no influence” (1) to “considerable influence” (7) on the business of the firm. In this research, stringency of regulation is measured by the survey item: “To what degree do you agree with the following statement: Environmental regulations have a considerable impact on my firms’ business”, respondents are requested to indicate whether they agree or disagree with the statement by answering on a 7 point Likert scale ranging from “strongly disagree” (1) to “strongly agree” (7).
Predictability of Regulation
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frequently changing” (1) or “transparent and stable” (7). In this study, the same survey item is used as an indicator for predictability of regulation.Customer Demand
Cleff and Rennings (1999) measure the impact of customer demand on environmental innovation by requesting respondents to indicate how important “market demand for eco-friendly products” is as an environmental innovation goal. Based on that measure, this research measures market demand by the survey item: “To what extent did market demand for environmental innovations influence your firm to develop environmental innovations between 2009 and 2012”. Respondents were asked to answer this question on a Likert scale ranging from “to an extremely small extent” (1) to “to an extremely large extent” (7).
Customer Benefits
Kammerer (2009) measures Customer Benefits by requesting respondents to answer the following question: “How do you rate the direct benefit to your customers from product improvements (In the area of energy efficiency; toxic substances; material efficiency; electromagnetic fields)”? Based on that survey item, this research uses the survey item: “How do you rate the following direct benefits (Reducing energy use, reducing air/water/soil nuisance, improving the recycling possibilities of a product) from your ecological innovations to your customers?”. Respondents are asked to answer this question by indicating the answer on a 7 point Likert scale ranging from “no benefit at all” to “extremely large benefit”.
R&D Intensity
R&D intensity of a firm is typically measured by R&D expenditures (Barry, 2005). Therefore, this study uses R&D investments (in euro’s) for 2012 as an indicator for R&D intensity. The following survey item is used: “How much did your company invest in Research &Development in 2012?” Respondents are asked to answer in a numeric way.
Green Capabilities
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Control variablesThe control variable size is measured by the number of salaried employees (FTE) in 2012. Firm age is measured by the firm’s age in 2013. Controlling for industry is done by requesting respondents to indicate in which industry their company is operating. As measured by Tether (2002), the presence of networks is first measured in a binary way by asking respondents if in the last three years they have cooperated for environmental innovation. In the follow-up question, respondents are asked to tick the type of co-operation partners they have worked with. Options are external partners, suppliers, customers, competitors, universities, consultants, and government institutions.
3.4 Analysis
To find evidence to either accept or reject the hypotheses in this research, multiple regression analysis is performed. Multiple regression analysis is a statistical process for estimating relationships among variables. Explained in more detail, regression analysis helps to find out how the value of the dependent variable (in this case environmental innovativeness) changes when one of the independent variables varies, while the other independent variables are remained fixed (Field, 2005. p157). Prior to running the regression, reliability analysis used to check if all questions for the survey item customer benefits actually contributed similarly to measuring the construct. After reliability analysis, a regression analysis is executed.
The regression analysis is performed in a hierarchical manner, meaning that the independent variables are entered in two stages. In the first stage, the independent variables that we want to control for are entered into the regression. In the second stage, the independent variables whose relationship is examined are entered. A statistical test of the change in R-square will then be used to evaluate the importance of the variables entered in the second stage.
For this analysis, the dependent variable, environmental innovativeness, has undertaken a log-transformation. This transformation was necessary to control for the skewed distribution of the number of environmental innovations that the firms launched. After the log-transformation, the variable was normally distributed, which means that it could be entered in the analysis. For the same reason, the independent variable R&D activity/general innovativeness and the control variable firm size were also log-transformed.
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(α) for a multi-item scale should be at least .7 (Field, 2005. p667), values substantially lower indicate an unreliable scale. The reliability of the scale for customer benefits not sufficient (α=.167), therefore, the item “recycling benefits” is removed from the scale. After deleting the survey item recycling benefits, the Cronbach coefficient alpha (α=.978) is sufficient.3.5 Regression Model
In multiple regressions the model takes the form or equation. In that equation, there are several unknown quantities (the β-values). Equation formula of the regression model is listed below.
Yᵢ = ln α₀ + β₁ ln χ₁ᵢ + β₂ χ₂ᵢ + β₃ χ₃ᵢ + β₄ χ₄ᵢ + β₅ χ₅ᵢ + β
₆χ
₆ᵢ + β
₇χ
₇ᵢ + β
₈χ
₈ᵢ + β
₉χ
₉ᵢ + β
₁₀χ
₁₀ᵢ
+ β
₁₁χ
₁₁ᵢ + β
₁₂χ
₁₂ᵢ + β
₁₃χ
₁₃ᵢ + β
₁₄χ
₁₄ᵢ + β
₁₅χ
₁₅ᵢ + β
₁₆χ
₁₆ᵢ + β
₁₇χ
₁₇ᵢ + β
₁₈ln χ
₁₈ᵢ + β
₁₉χ
₁₉ᵢ + β
₂₀χ
₂₀ᵢ + ɛᵢ
Yᵢ = dependent variable: Environmental Innovation α₀ = constant, unstandardized B coefficient of base case χ₁ᵢ = control variable: firm size
χ₂ᵢ = control variable: firm age χ₃ᵢ = control variable: cooperation yes
χ₄ᵢ to χ₁₃ᵢ = control variables for several industries χᵢ₁₄= independent variable: stringency
χ₁₅ᵢ = independent variable: predictability χ₁₆ᵢ = independent variable: customer demand χ₁₇ᵢ = independent variable: customer benefits χ₁₈ᵢ= independent variable: R&D investments χ₁₉ᵢ = independent variable: EMS yes
χ₂₀ᵢ = independent variable: EMS developing ɛᵢ= Error term
ᵢ = Respondent
3.6 Validation
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Heteroscedasticity
Heteroscedasticity refers to the distribution of numbers for one variable in relation to the distribution of numbers for another variable (Field, 2005). To assess the presence of heteroscedasticity, a scatterplot is provided. Figure 2 shows the unstandardized residuals for the time of observation (2009-2012). The figure shows a somewhat acceptable evenly divided cloud of observations. This indicated no reason to suspect heteroscedasticity (Field, 2005).
Figure 2: Scatterplot of unstandardized residuals
Multicollinearity
In regression analysis, multicollinearity refers to predictors that are correlated with other predictors. It occurs when a regression model includes multiple factors that are correlated not only to the dependent variable, but also to each other (Field, 2005). To assess for multicollinearity, the collinearity diagnostics VIF and Tolerance, are used. Those diagnostics can be found in table To guarantee the absence of multicollinearity, VIF rates should be lower than 10 and tolerance rates should be smaller than 1. Diagnostics are shown in table 3. VIF values between the variables and firm size and R&D investments were the highest (3.341 and 2.139). However, since all diagnostics are clearly below 10 (for VIF) and smaller than 1 (for Tolerance), the absence of multicollinearity is guaranteed.
Non-normality
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4. RESULTS
4.1 Means, Standard Deviations and Correlations
As a starting point for the analysis, the interrelatedness among the variables is tested by performing a correlation analysis. Table 3 presents the means, standard deviations, and correlations among the variables examined in the study. The average size of firms in the sample was 2554.31 employees (FTE), with a minimum of 1 and a maximum of 180.000 employees. The average age of firms in the sample is 38.19 years, with a minimum of 1 year and a maximum of 145 years. When looking at environmental
innovation activity, out of 174 firms participating in the survey, 75% implemented environmental
innovation(s) from 2009-2012. The average amount of environmental innovations developed by firms within the sample in 2012 is 4.69. Concerning R&D intensity, firms in the sample invested €5.502.288 on average in 2012. 23.6% of firms in the sample implemented an Environmental Management System, such as ISO or EMAS. 13.6% of the sample is still developing an EMS.
The correlation analysis shows that all variables except for the variable predictability of regulation correlate significantly with the dependent variable environmental innovativeness. The correlation matrix in table 2 also shows that several dependent variables correlate with each other. Firstly, the variable
general innovativeness/R&D intensity significantly correlates with the variables stringency of regulation
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Variable Mean s.d. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 1.Num Env Innovations 4.69 12.006 2.Stringency 3.88 1.658 .191** 3.Predictability 3.05 1.222 .059 -.14 4.Customer demand 5.09 1.622 .172* .106 -.016 5.Customer Benefits 5.05 1.49938 .162* -.113 -.036 .237* 6.R&D Investments/Gen innovativeness 5.502.8 88 52.232.14 7 .388** .183* .109 .127 .227** 7.EMS Yes .2364 0.42582 .328** .048 .156* .059 -.065 .323** 8.EMS Developing .1364 0.34396 .116 .132 -.06 .098 .137* .045 -.221** 9.Size 2554,31 1056,22 .313** .150* .212** -.105 -.036 .380** .421** .076 10.Age 38.19 34.09 .180** .121 .155** -.103 -.050 .211** .320** -.018 .717** 11.Cooperation Yes .6227 .48581 .331** .105 -.050 .260** .120 .176* .124 .118 .011 -.02212.Food and Drinks .0682 .25263 .030 -.023 .052 .131 .049 .045 .019 -.002 .011 -.021 -.013
13.Construction and Building
.1000 .30068 .044 -.057 -.090 -.082 .056 .058 .100 .044 .093 .032 .041 -.090
14.Wood and Paper .0409 .19853 -.079 .120 -.007 -.034 -.129 .058 -.115 .052 .119 -.010 .019 -.056 -.069
15.Energy .0773 .26763 .089 .068 .001 -.031 .032 .055 .039 -.016 -.014 -.053 .015 -.078 -.096 -.060 16.Industrial .1318 .33906 .100 .028 .020 .038 -.045 .095 .099 .080 .061 .126 .082 -.105 -.130 -.080 -.113 17.Retail and Whosesale .1045 .30666 -.224** -.130 .133* -.020 -.074 -.089 .020 -.092 -.104 .044 -.102 -.092 -.114 -.071 -.099 -.133* 18.Transportation .0864 .28154 -.029 .079 .004 -.036 .000 -.230** .019 -.075 .239** .292** .006 -.083 -.102 -.063 -.089 -.120 -.105 19.Information and Communication .0409 .19853 -.051 -.039 -.027 .013 -.009 -.017 -.061 .052 -.061 -.127 -.029 -.056 -.069 -.043 -.060 -.080 -.071 -.063 20.Electronics .0591 .23633 .028 -.006 .051 -.041 .093 .029 -.003 .013 -.021 .000 -.123 -.068 -.084 -.052 -.073 -.098 -.086 -.077 -.052 21.Advise and Research .1409 .34872 -.024 -.007 -.181** .084 -.052 .000 -.164* .067 -0.148* -.173** -.008 -.110 -.135* -.084 -.0117 -.158* -.138 -.125 -.084 -.101
Notes: N=174 for all variables * p<0.05; **p <0.01
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4.2 Regression Results
Table 4 summarizes the results of the regression analysis. Regression is performed in a hierarchical manner. First, control variables are entered in the regression. In the second model, the independent variables are added. Model 2 as a whole is significant at the 5% level (p < 0.05). Furthermore, R² (R² = 0.372) indicates that the predictors, or in this case the determinants, partially explain a firms’ environmental innovativeness. Since the adjusted R² (0.290) is significantly lower than R², some explanatory variable(s) are most likely missing.
Hypotheses 1a and 1b are related to the regulatory determinants of a firms’ environmental innovativeness. Hypotheses 1a and 1b predict that, respectively stringency and predictability of environmental regulation positively affect a firms’ environmental innovativeness. Results show that the relationship between the variables stringency and environmental innovativeness is significant and positive (0.067; p < 0.1). However, the relationship between predictability and environmental innovativeness is not significant and negative (-0.017; p > 0.1). Accordingly, hypothesis 1a is accepted and hypothesis 1b is rejected.
Hypotheses 2a and 2b are related to the market determinants of environmental innovativeness. Hypothesis 2a predicts that market demand for environmentally friendly innovations positively affects a firms’ environmental innovativeness. Results show that the relationship between the variables customer demand and environmental innovativeness is not significant (0.035; p > 0.1). Hypothesis 2b predicts that visible
customer benefits of a firm’s offering positively affect a firms’ environmental innovativeness.
Nevertheless, results show that the relationship between the variables customer benefits and
environmental innovativeness is also not significant (0.003; p > 0.1). Therefore, both hypotheses 2a and
2b are rejected.
Hypotheses 3a and 3b are related to the firm-internal determinants of environmental innovativeness. Hypothesis 3a predicts that R&D intensity positively affects a firms’ environmental innovativeness. Results show that the relationship between the variables R&D investments/general innovativeness and
environmental innovation is significant and positive (0.082; p < 0.05). Hypothesis 3b predicts that the
presence of green capabilities positively affects a firms’ environmental innovativeness. H3b is supported as a significant positive relationship between the variables EMS and environmental innovativeness is found (0.359; p < 0.05). Consequently, both hypothesis 3a and 3b are accepted.
