Can environmental innovation be a conventional source of higher market valuation? / Yann Truong and Pascual Berrone
Series: Journal of Business Research. March 2022 ; Volume 142Publication details: Elsevier 2021Description: pp.113-121ISSN:- 0148-2963
Item type | Current library | Collection | Call number | URL | Status | Date due | Barcode | Item holds | |
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Article | Strathmore University (Main Library) Online Resource | Reference Section | Link to resource | Not for loan | SD-S0148296321009541 |
We employ the literature on institutional theory and environmental management to argue that environmental innovation as an unconventional source of innovation can lead to financial performance through environmental legitimacy. Using data on environmental innovation (in the form of patents), environmental legitimacy, and market valuation for 191 industrial firms in polluting industries for a 25-year period, our analysis supports our argument. The results show that environmental innovation has a positive impact on market value, but this relationship is partially mediated by legitimacy. Although firms tend to not consider environmental innovation as a conventional source of competitive advantage and financial returns, our findings indicate that managers of industrial firms should focus their operations on developing environmental innovations to attain legitimacy in industries that are stigmatized by high pollution levels. In turn, environmental legitimacy will not only shield the firm from the industry’s mounting institutional pressures but also lead to higher market valuation.
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