Mature Companies at Scale Are Best Positioned to Adopt Green Technologies
Firms can become more competitive and grow at higher rates by adopting sustainable practices and complying with environmental regulations, according to a recent study Leoncini et al. at the University of Sussex.
The impact of green technologies on firm growth has been minimally investigated, especially compared to the abundant literature on ‘standard’ innovation as a growth driver. The study aims to close this gap by understanding how the adoption of green technologies affects a firm’s growth, and how this relationship varies with a firm’s age. The study analyzed roughly 5500 Italian manufacturing firms over the period of 2000-2008.
Two important conclusions emerged from the study.
- Green technologies have a greater impact on the growth of mature firms than non-green technologies.
There are several reasons for this, including higher resource efficiency, which reduces production costs (e.g. reduced material and energy use). Firms that adopt green technologies are also in a position to enter green markets and reinvest the relative extra returns from eco-innovating.
- More mature firms are better equipped to transform green technology growth than struggling firms or rapidly growing firms.
More mature companies seem to be better equipped to transform green technology into growth. Although further research is required to explain this difference in adaptability, it seems to be a result of the fact that older firms have more experience and financial resources to take on the cost of newer, uncertain technologies. Struggling firms and fast-growing firms are restricted by the need to survive, or the pressure to maintain high growth rates.
These results hold important implications both for management and policy. Extracting value from green technology and transforming it into higher growth is not a ‘one-size-fits-all’ strategy.
The full study can be accessed here.
Contributed by Ana Rita V. Nunes