Diminishing returns or inverted U? The curvilinear relationship between eco-innovation and firms' sustainable business performance: the impact of market turbulence

Abstract

PurposeEco-innovations (EIs) are intended to benefit not only the environment but society and firms, but how the relationship is reconciled is unclear, particularly in emerging economies. The advancement of EI has resulted in both positive and negative relationships with sustainability, indicating that the association is more complex than a simple linear one.Design/methodology/approachThus, the authors hypothesize that EI has a curvilinear relationship with sustainable business performance (SPB) and that market turbulence (MT) exerts stimulus that reinforces EIs. Accordingly, using the Stata software, the authors apply a moderated regression to a sample size data of 511 manufacturing firms to test the hypothesized assumptions.FindingsAlthough the results attest to a positive relationship between EI and SBP, the results are synonymous with an inverted “U” shape that renders EIs unprofitable beyond a certain threshold (rebound effect). Additionally, the authors observe that the moderation stimulus of technology turbulence flattens the inverted U-shaped curve.Originality/valueBuilt on the foundations of natural-resource-based view (NRBV) and contingency theory, the authors identify the rebound effect point of EI and SBP and the reinforcing stimulus of MT.