Journal
SUSTAINABILITY
Volume 13, Issue 11, Pages -Publisher
MDPI
DOI: 10.3390/su13116253
Keywords
eco-innovation; proactive eco-innovation; proactive eco-innovation index; firm financial performance; panel data; circular economy
Funding
- Yayasan-Universiti Teknologi PETRONAS Fundamental Research Grant Scheme (YUTP-FRGS) [015LC0-016]
- FRGS (Fundamental Research Grand Scheme), Ministry of Higher education, Malaysia [015 MAO-040]
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This study investigates the relationship between proactive eco-innovation and firms' financial performance using a secondary panel dataset. The findings indicate that proactive eco-innovation has a direct effect on firm financial performance and is related to circular economy.
Eco-innovation has gained considerable attention in the academic and corporate world due to its potential in mitigating a firm's sustainability issues. Most previous studies focused on the reactive approaches of eco-innovation using primary data. This study mitigates the existing research gap by highlighting proactive eco-innovation and using a secondary panel dataset. The prime objective of this study is to investigate the relationship between proactive eco-innovation and firms' financial performance. Hence, the study will introduce the proactive eco-innovation index with the help of secondary panel data. In addition to that, the paper will also explore how proactive eco-innovation relates to circular economy. The theory of Resource-Based View (RBV) was used to explain the relationship among the variables. This study was conducted on 31 Malaysian public listed energy companies from 2015 to 2019. A proactive eco-innovation index was inferred by adapting three dimensions of eco-innovation (product, process, and technology) which is applicable for the energy sector. By applying random-effects GLS regression equation modeling, it was found that proactive eco-innovation (product eco-innovation, process eco-innovation, and technology eco-innovation) has a direct effect on firm financial performance. Furthermore, product and process eco-innovation is directly related to a circular economy through a sustainable product development process. The findings suggest that policymakers in the firm should proactively adopt eco-innovative practices. It will positively affect the circular economy as it will be cost-effective and help to reduce potential industrial pollution in the environment.
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