Green innovation in the automobile industry

Purpose - Despite the stimulation provided by market demand and green issues on business performance, the exact nature of the relationships among these aspects remains an issue of contention. This study sought to bridge this gap in the research by examining the effects of market demand on firm performance using green innovation and environmental performance as mediators. The paper aims to discuss these issues. Design/methodology/approach - The Taiwanese hybrid vehicle industry was targeted as the scope of research. Using random sampling method, survey questionnaires were distributed to retailers, wholesalers, and component sale firms in the industry through post and e-mails. AMOS 5.0 and the structural equation modeling (SEM) were used to test the hypotheses and the theoretical model. Findings - Except for the impact of market demand on environmental performance, all relationships were found to be significant. The mediating effect of green innovation which was proven to be significant, while that of environmental performance remained insufficient. Research limitations/implications - This study has a number of limitations. The use of figures from a single industry partly restricts the generalizability of these findings. Practical implications - These results suggest that firms should make greater efforts to understand customer needs and promote core competencies in the innovation of green products and processes to align green initiatives with consumer values in order to satisfy market demand and ensure sustainable performance. Social implications - This study has important implications for the hybrid vehicle industry in particular and all businesses in general. The results provide guidelines for the enhancement of business performance. Based on the significant impact of market demand on green innovation, this study strongly recommends that firms make greater efforts to understand customer needs and expectations. Originality/value - This study was the first to establish a model for investigating the links among market demand, green innovation, environmental performance, and firm performance in the Taiwanese hybrid vehicle industry. The findings provide effective guidelines for the achievement of market leadership and sustainable performance.