The determinants of eco innovation and conventional innovation among manufacturing SMEs

Joint with D. Doloreux and R. Shearmur

Highlighting the critical role of Small and Medium Enterprises (SMEs) in both economic growth and environmental impact, this study investigates the determinants of eco-innovation and conventional innovation within 634 manufacturing SMEs in Quebec, Canada. Using multinomial logit analysis, we analyze the drivers of the two types of innovation along the following dimensions: absorptive capacity, motivation, firm level characteristics and geography. We find that while regulatory compliance is the key driver for eco-innovation, factors such as R&D, sales growth and employee education mainly influence conventional innovation. Interestingly, our analysis reveals that geography plays a nuanced role: SMEs in areas with higher population density are more inclined to eco-innovate, whereas those in firm-dense regions are more likely to engage in radical innovation. Crucially, our further analysis reveals that these two types of innovation are complementary rather than conflicting. This suggests that policy measures designed to stimulate eco-innovation among SMEs are not only non-detrimental but could also have a mildly positive impact on conventional innovation.