Does firm size matter? Evidence on the impact of the green innovation strategy on corporate financial performance in the automotive sector

Abstract

In the past few years, there has been increasing awareness regarding the significance of the Green Innovation Strategy (GIS) in the academic and practical fields. Hence, it becomes important to determine the correlation between the GIS and the Corporate Financial Performance (CFP). This study attempted to determine the dynamic correlation between the GIS and the CFP, with regards to the firm size. For this purpose, this study has collected data for 163 international automotive firms, from the CSRHub database, for the period ranging between 2011 and 2017. Furthermore, we also used the dynamic panel data system, i.e., the Generalised Method of Moment (GMM) method, for estimating this relationship. The empirical results indicated that the GIS positively affected the CFP. Interestingly, we also uncovered that the firm size moderated the negative correlation between the GIS and the CFP. The small-sized firms showed higher green innovation investments return than the larger-sized firms, which indicated that these smaller firms were more prone to seek variation and visibility, for accessing better resources. Furthermore, due to the extensive scrutiny of the stakeholders, these small firms could generate higher profits. The implications for managers and the theories in this regard are then discussed.

Profit Maximization Strategies Employed by the Small and Medium Size Building Contractors in Dar-Es-Salaam, Tanzania

“…Wrap (2018) supports this strategy by insisting on its benefit, as it is a direct cost saving to the project, and for every skip of waste that is eliminated through waste reduction strategies, so is the associated cost of the procurement and purchase. This is also in conformity with the empirical results of a 2019 study by Lin et al (2019), which indicated that; GIS positively affected corporate Financial Performance (FP). Precisely, their study showed that; small and medium sized firms were more prone to variations and visibility for accessing better resources that could generate higher profits.…”

How market value relates to corporate philanthropy and its assurance. The moderating effect of the business sector

“…This type of corporate philanthropy can be perceived positively by investors and may benefit the market value of the company. The use of foundations is related to strategic corporate philanthropy (Liket & Maas, ).…”

Effect of green innovation strategy on firm‐idiosyncratic risk: A competitive action perspective

“…In recent years, companies have to integrate ideas for protecting the environment. Hence, many automotive firms have begun using innovative green technology for managing their businesses (Lin, Cheah, Azali, Ho, & Yip, ; Lin, Chen, & Huang, ). Effective management can reduce firm risk by increasing the value, increasing the competitive advantage, and improving the performance of the firm (Chang, ; Chang & Chen, ; Lin et al, ; Tang, Walsh, Lerner, Fitza, & Li, ).…”

“…Hence, many automotive firms have begun using innovative green technology for managing their businesses (Lin, Cheah, Azali, Ho, & Yip, ; Lin, Chen, & Huang, ). Effective management can reduce firm risk by increasing the value, increasing the competitive advantage, and improving the performance of the firm (Chang, ; Chang & Chen, ; Lin et al, ; Tang, Walsh, Lerner, Fitza, & Li, ). In their study, Shrivastava () and Yu and Ramanathan () have suggested that the firms need to develop different and innovative products, improve the overall product quality, and decrease the production costs, based on the product and process innovations.…”

“…Even though GIS is vital in the existing industrial environment, many earlier studies have noted some ambiguities related to its performance (Grewatsch & Kleindienst, 2017;Lin et al, 2019;Przychodzen & Przychodzen, 2015). A few researchers have stated that GIS can improve the firms' competitiveness.…”