Does sustainable innovation respond to SME's growth? European empirical evidence

Abstract

There is an ongoing scholarly debate regarding the compatibility of sustained high levels of firm-level growth with today's environmental sustainability goals, which include targets for limiting carbon emissions and avoiding further biodiversity loss. In this study, we aim to explore this issue through a quantitative analysis of the relationship between firm-level growth and sustainable innovation (i.e., all innovations with benefits for the environment) within an international sample of small- and medium-sized enterprises (SMEs). To accomplish this, we utilise micro-data from the Community Innovation Survey, based on the conceptual framework provided by the Oslo Manual. By employing econometric models, we demonstrate that sustainable innovations promote SME growth. Specifically, we find that SMEs implementing sustainable innovations experience higher growth compared to those that do not practice them. Our research not only contributes to the existing literature in economics and management by providing more extensive knowledge but it also identifies several policy and management implications. Furthermore, we seek to offer novel insights into the importance of sustainable innovations adopted by growth-oriented SMEs.