The Nexus between Proactive Eco-Innovation and Firm Financial Performance: A Circular Economy Perspective

Abstract

Eco-innovation has gained considerable attention in the academic and corporate world due to its potential in mitigating a firm’s sustainability issues. Most previous studies focused on the reactive approaches of eco-innovation using primary data. This study mitigates the existing research gap by highlighting proactive eco-innovation and using a secondary panel dataset. The prime objective of this study is to investigate the relationship between proactive eco-innovation and firms’ financial performance. Hence, the study will introduce the proactive eco-innovation index with the help of secondary panel data. In addition to that, the paper will also explore how proactive eco-innovation relates to circular economy. The theory of Resource-Based View (RBV) was used to explain the relationship among the variables. This study was conducted on 31 Malaysian public listed energy companies from 2015 to 2019. A proactive eco-innovation index was inferred by adapting three dimensions of eco-innovation (product, process, and technology) which is applicable for the energy sector. By applying random-effects GLS regression equation modeling, it was found that proactive eco-innovation (product eco-innovation, process eco-innovation, and technology eco-innovation) has a direct effect on firm financial performance. Furthermore, product and process eco-innovation is directly related to a circular economy through a sustainable product development process. The findings suggest that policymakers in the firm should proactively adopt eco-innovative practices. It will positively affect the circular economy as it will be cost-effective and help to reduce potential industrial pollution in the environment.

Eco-Innovation Capabilities and Sustainable Business Performance during the COVID-19 Pandemic

“…According to Fernando [9], the right integration of ecoinnovation and business strategy should be easy to understand and, more importantly, usable by all corporate stakeholders while increasing firm capabilities and minimising negative environmental effects during the manufacturing process. Eco-innovation activities were expanded during the COVID-19 pandemic [35]. Eco-innovation is expressed in Malaysia through the concept of green technology, and by combining the innovation process and technology into their business model, organisations can achieve long-term survival while simultaneously competing more effectively in the market [13].…”

The Inter-Relationship between Innovation Capability and SME Performance: The Moderating Role of the External Environment

“…Researchers have found that those firms with a high level of innovation activities and capabilities gain better responses from the environment and obtain a competitive advantage to enhance their performance [2,16,20]. Various scholars and researchers stressed that one of a firm's vital resources is innovation, as it has a significant effect on a firm's performance [4,[42][43][44]. Robust findings show a significant and positive relationship between innovation and firm performance [4,[44][45][46].…”

Green Transition: The Frontier of the Digicircular Economy Evidenced from a Systematic Literature Review

“…For example, Johl S.K. and Toha [35] performed a study in 31 Malaysian public energy companies; Kiefer et al [36] carried out a similar study in Spain. The waste generation management problem is investigated by Magazzino et al [37] who proposed an experiment based on artificial neural networks to understand how to interact within a complex ecosystem such as between the environment and waste.…”