Does green innovation affect the financial performance of Multilatinas? The moderating role of ISO 14001 and R&D investment

Abstract

The purpose of this study is to explore the relationship between green innovation (GI) and financial performance (FP) in emerging markets multinationals from Latin America (Multilatinas). Aligned with the natural resource-based view and institutional theory, and using moderated and hierarchical linear regression analyses with panel data from 86 listed firms during the period 2013-2017, we find that implementing effective GIs is not associated with greater FP. The paper also analyses the moderating effect of Environmental Management Systems (ISO 14001) and research and development (R&D) investment on the relationship between GI and FP. We find that Multilatinas' implementation of ISO 14001 does not affect the way they adopt GI and thus does not enhance their levels of FP, but a positive moderating effect is generated as companies increase their level of R&D investment. The paper expands knowledge of the way GI affects Multilatinas' FP, and these findings have policy implications for managers, policy makers, government and other institutions.

Environmental management practices and financial performance: evidence from large listed Indian enterprises

“…Cohen et al (1997) study the environmental performance of Standard and Poor's 500 companies and find that neither the 'green companies' are rewarded nor penalized for their environmental efforts. Duque et al (2020) study the impact of green innovation on financial performance in emerging markets multinationals from Latin America using panel data from 86 listed firms. They fail to establish a link between green practices and financial performance of a firm.…”

“…There is an extensive body of research studying the impact of environmental management on firms' financial performance; both theoretically (Porter & Van der Linde, 1995;Shahgholian, 2019) and empirically (King & Lenox, 2001;Konar & Cohen, 2001;Melnyk et al, 2003;Lucas & Noordewier, 2016). While some studies deduce a positive relation between the two constructs (Hart & Ahuja, 1996;King & Lenox, 2001;Klassen & McLaughlin, 1996;Konar & Cohen, 2001;Russo & Fouts, 1997;Hourneaux et al, 2014;Lucas & Noordewier, 2016), some others find a negative relation (Wagner et al 2002;Sariannidis et al, 2013;Chen et al, 2014), and there are some studies that fail to observe any linkage between environmental performance and financial performance (Iraldo et al, 2009;Böhringer et al, 2012;Duque et al, 2020).…”

R&D Investment, Financial and Environmental Performance Nexuses via Bootstrap Fourier Quantiles Granger Causality Test

“…Ezhilarasi and Kabra (2020) found that R&D investment has a positive influence on FFP. Duque-Grisales et al (2020) reported that a positive moderating effect of R&D investment on the nexus between FFP and green innovation was exhibited in firms with increasing R&D investments, analyzing 86 listed firms in emerging transnational markets in Latin America.…”

“…In summary, previous studies conclude that the greater the R&D investment, the greater the CO 2 emission reduction (better FEP). However, Duque-Grisales et al (2020) state that green R&D investment is not associated with better FFP.…”

“…Moreover, innovation is a strategy, i.e., several firms have lowered CO 2 emissions, upgraded competitiveness and improved FFP concurrently (Triguero et al 2013). For this reason, this innovation is a key outcome of firms' research and development (R&D) investments; R&D investment has a positive influence on FFP simultaneously (Scarpellini et al 2019;Duque-Grisales et al 2020;Ezhilarasi and Kabra 2020). Relevant green R&D investment not only reduces CO 2 emissions, upgrading FEP (Samsul et al 2019), it also improves FFP (Lee and Min 2015) and firm value (Ganda 2018).…”