Can green innovation promote the financial performance of SMEs? Empirical evidence from China

Abstract

AbstractThis paper contributes to the existing knowledge on the correlation between green innovation and financial performance among small and medium‐sized enterprises (SMEs). It examines the effects of two types of green innovation, specifically green product innovation and green process innovation, on the financial performance of SMEs. Additionally, it investigates the moderating role of economic support and predetermined targets, which are essential components of government subsidy programs, in relation to the aforementioned associations. Based on the panel dataset collected from Chinese manufacturing and energy industries covering the period of 2011–2021, the results show that (1) green product innovation may not positively impact the financial performance of SMEs; (2) green process innovation could enhance the financial performance of SMEs; (3) economic support may positively moderate the relationship between green process innovation and the financial performance of SMEs, while predetermined targets may negatively influence this relationship. These findings have considerable implications for practitioners, policymakers, and researchers in the industrial sector.