Page 99 - Hojnik, Jana. 2017. In Persuit of Eco-innovation. Drivers and Consequences of Eco-innovation at Firm Level. Koper: University of Primorska Press
P. 99
Consequences of Eco-innovation Adoption 99
nificantly improved existing ones (in order to become more environmen-
tally friendly) can, through the reduction of needed inputs through pro-
duction, lead to improved productivity and ensure the compatibility of
cost savings and reduction of environmental harm (Triguero et al. 2013).
Therefore, on the one hand, product innovations have the potential to
create new markets, lead to competitive advantages through greater dif-
ferentiation from competitors’ products and gain greater profit margins
(Ramanathan et al. 2010). Meanwhile, researchers (Porter and van der
Linde 1995a; Porter and van der Linde 1995b; Ramanathan et al. 2010)
add that process innovations can also result in cost reduction through
the increase of energy efficiency and less waste production. On the other
hand, the uptake of innovation and its implementation may not necessar-
ily result in benefits for the company that has undertaken those innova-
tions; because of high initial investments in R&D, such financial benefits
are not acquired in the short-term (Ramanathan et al. 2010).
Researchers (Ghisetti and Rennings 2014) emphasize another pecu-
liarity regarding environmental innovations and their relationship with
profitability, pertaining to different typologies of eco-innovation. Based
on their research, they conclude that, while it pays to be green, the ben-
efit depends on the way in which a company is green (Ghisetti and Ren-
nings 2014). Their findings indicate that for those environmental innova-
tions that aim to reduce externalities (e.g., harmful materials, air, water,
noise and soil pollution), it does not pay to be green, in the sense that
these innovations may be profitable in the long run (due to improved en-
vironmental regulation) but do not pay off in the short run (when com-
panies cope with environmental regulations as restrictions) (Ghisetti and
Rennings 2014). On the other hand, energy- and resource-efficient inno-
vations lead to a potential “win win” situation (reduced environmental
impact of production and improved companies’ economic performance).
Hence, it definitely pays to be green when engaging in environmental
innovations, which lead to reduction in the use of resources and energy
(Ghisetti and Rennings 2014). Energy and resource efficient innovations
exert a positive and strongly significant effect on companies’ profitability,
while the externality-reducing innovations negatively affect companies’
operating margins (Ghisetti and Rennings 2014). Similarly, Rexhäuser
and Rammer (2013) pointed out that environmental innovations relat-
ed to reduction of energy and material input demonstrate a positive im-
pact on companies’ profitability (driven by cost reduction), while envi-
ronmental innovations focused on reduction of environmental pressures
(driven by regulations) negatively and weakly affect companies’ profita-
nificantly improved existing ones (in order to become more environmen-
tally friendly) can, through the reduction of needed inputs through pro-
duction, lead to improved productivity and ensure the compatibility of
cost savings and reduction of environmental harm (Triguero et al. 2013).
Therefore, on the one hand, product innovations have the potential to
create new markets, lead to competitive advantages through greater dif-
ferentiation from competitors’ products and gain greater profit margins
(Ramanathan et al. 2010). Meanwhile, researchers (Porter and van der
Linde 1995a; Porter and van der Linde 1995b; Ramanathan et al. 2010)
add that process innovations can also result in cost reduction through
the increase of energy efficiency and less waste production. On the other
hand, the uptake of innovation and its implementation may not necessar-
ily result in benefits for the company that has undertaken those innova-
tions; because of high initial investments in R&D, such financial benefits
are not acquired in the short-term (Ramanathan et al. 2010).
Researchers (Ghisetti and Rennings 2014) emphasize another pecu-
liarity regarding environmental innovations and their relationship with
profitability, pertaining to different typologies of eco-innovation. Based
on their research, they conclude that, while it pays to be green, the ben-
efit depends on the way in which a company is green (Ghisetti and Ren-
nings 2014). Their findings indicate that for those environmental innova-
tions that aim to reduce externalities (e.g., harmful materials, air, water,
noise and soil pollution), it does not pay to be green, in the sense that
these innovations may be profitable in the long run (due to improved en-
vironmental regulation) but do not pay off in the short run (when com-
panies cope with environmental regulations as restrictions) (Ghisetti and
Rennings 2014). On the other hand, energy- and resource-efficient inno-
vations lead to a potential “win win” situation (reduced environmental
impact of production and improved companies’ economic performance).
Hence, it definitely pays to be green when engaging in environmental
innovations, which lead to reduction in the use of resources and energy
(Ghisetti and Rennings 2014). Energy and resource efficient innovations
exert a positive and strongly significant effect on companies’ profitability,
while the externality-reducing innovations negatively affect companies’
operating margins (Ghisetti and Rennings 2014). Similarly, Rexhäuser
and Rammer (2013) pointed out that environmental innovations relat-
ed to reduction of energy and material input demonstrate a positive im-
pact on companies’ profitability (driven by cost reduction), while envi-
ronmental innovations focused on reduction of environmental pressures
(driven by regulations) negatively and weakly affect companies’ profita-
