Eco-Innovation – Does Additional Engagement Lead to Additional Rewards?

Purpose Eco-innovation is any form of product, process or organisational innovation that contributes towards sustainable development. Firms can eco-innovate in a variety of ways. In this paper we identify nine different eco-innovation activities - including such items as reducing material use per unit of output, reducing energy use per unit of output, reducing CO2 'footprint' - and we ask whether these act as substitutes or complements to one another. Design/ Methodology/ Approach Using data for over 2,000 Irish firms collected in a special module included in the sixth Community Innovation Survey we test whether the introduction of two eco-innovation activities over a short period of time provide a greater (lesser) benefit to the firm, in terms of turnover, than the introduction of these eco-innovations individually. Findings Introducing only one eco-innovation activity has little payoff (in terms of turnover per worker) with only those firms who reduce their CO2 'footprint' having higher levels of turnover per worker. When introducing more than one eco-innovation activity we find that certain eco-innovation activities complement one another (e.g. reducing material use within the firm at the same time as improving the ability to recycle the product after use) others act as substitutes (e.g. reducing material use within the firm at the same time as recycling waste, water, or materials within the firm). Practical Implications Our results suggest that firms can maximise their productive capacity by considering specific combinations of eco-innovation. This suggests that firms should plan to introduce eco-innovation which act as complements, thereby, boosting productivity. It also suggests that eco-innovation stimuli, introduced by policy makers, should be targeted at complementary eco-innovations. Originality We analyse whether eco-innovations act as complements or substitutes. While a number of studies have analysed the importance of eco-innovation for firm performance, few have assessed the extent to which diverse types of eco-innovation interact with each other to complement or substitute one another.