Does innovation practices enhance the impact of environmental criteria adoption over entrepreneurial SMEs’ performance?

Abstract

There is extensive research on the consequences of implementing various environmental practices across countries and industries. The results show that this issue is highly context-dependent, and further research is required considering the institutional context and features of the industry and firms under study. Similarly, the underlying relationship mechanisms between environmental criteria adoption and performance also require further research. This paper analyzes this relationship and the mediating role of innovation practices in Spanish small and medium-sized enterprises (SMEs). It examines SMEs in four industries, distinguishing between micro, small, and medium-sized firms. A stratified sample of 1,044 Spanish SMEs was collected. The sample was representative of the SME population in terms of industry, size, and region. The PROCESS macro and bootstrapping were employed to estimate the indirect, total, and direct effects and test the proposed hypotheses. This research sheds light on the relationships between environmental criteria adoption and performance, thereby addressing recent calls in the literature. The total effect of environmental criteria adoption on firm performance is positive and significant, regardless of size or industry. However, the direct relationship between environmental criteria adoption and performance may be small and sometimes non-significant. In contrast, the effect is higher and statistically significant under mediation by innovation practices. Industry and company size moderate the impact of environmental criteria adoption on performance.