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Degree Project

Master’s degree

Eco-innovations and firms’ financial performance

A study of a relationship between eco-innovations and financial performance of firms who make them.

Author: Polona Cigoj Supervisor: Asif M Huq Examiner: Dr. Klas Sundberg

Subject/main field of study: Business Studies Course code: FÖ3027

Higher education credits: 15 Date of examination: June 1, 2020

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DECLARATION OF OWN WORK

I hereby declare that I am the sole author of this master thesis and that I have not used any sources other than those listed in the bibliography and identified as references. I further declare that I have not submitted this thesis at any other institution in order to obtain a degree.

(Signature)

In Borlänge, 25. 5. 2020 _____________________

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ACKNOWLEDGMENTS

First and foremost, I would like to express my sincere gratitude to my thesis supervisor, Asif M Huq, for his continuous support, guidance and advice in my research process. Especially the empirical part, would not have been possible without his extensive knowledge and time committed into helping this study. I would also like to express my thanks to him for taking his time in showing me, how to collect financial data on Swedish firms, from the retriever database. I could not have imagined having a better supervisor.

I would also like to show my appreciation to Wensong Bai for reading through my many unstructured drafts and giving me a valuable second opinion throughout the process.

Lastly, I would like to thank my family for making my studies in Sweden possible and my friends Mona Zimmerer-Benz and Annabelle Dehms, for taking time away from their own theses, to help proofread mine.

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ABSTRACT

Much of the existing body of literature analyzes the relationship between eco-innovations and financial performance. Our study differentiates from this literature, by focusing on the scarcely investigated Nordic context, by providing a holistic view on eco-innovations and finally by analyzing also the effects eco-innovations have on marker performance. This research focuses on three types of eco-innovations (eco-product, eco-process, and eco-organizational), and additionally brings standard innovations into the perspective. To measure the impact eco-innovations in general and its categorized types have on financial performance, a sample of 50 Nordic listed firms, spread from the year 2003-2019, was employed. Financial performance was measured with profitability accounting measures (return on equity, return on assets, and operating margin), while market performance was measured with the change in firms’ market value. Our results indicate that eco-innovations were generally associated with lower profitability returns, except in the case of eco-process innovations.

Moreover, our findings interestingly showed, that market performance is positively affected by standard innovations and eco-organizational innovations. The findings suggest, that even when these types of innovations have no significant effect on profitability, investors still believe these innovations will increase the long-term real value of firms. Overall this study extends the discussion of eco-innovations to their effects on firm performance, based from an investor/shareholder perspective.

Key words: Eco-innovations, Sustainability, financial performance, market performance, Nordic region

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Table of contents

DECLARATION OF OWN WORK ...ii

ACKNOWLEDGMENTS ... iii

ABSTRACT ... iv

List of tables ... vii

LIST OF ABRIVIATIONS ... viii

1. INTRODUCTION ... 1

1.1 Background and the Nordic setting ... 5

2. THEORETICAL FRAMEWORK ... 8

2.1 Eco-innovation definition and characteristics ... 8

2.1.1 Eco-process innovations ... 9

2.1.2 Eco-product innovation ... 10

2.1.3 Eco-organizational innovation ... 10

2.2 Relationship between eco-innovations and firms' financial performance ... 11

2.3 Resource-based view ... 12

2.3.1 Relationship between standard innovations and firms’ financial performance ... 13

2.4 Natural resource-based view ... 13

2.5 Traditionalist view ... 17

3. RESEARCH DESIGN ... 19

3.1 Research method and strategy ... 19

3.2 Sampling technique ... 20

3.3 Measures ... 22

3.4 Methods of data analysis ... 27

3.5 Data quality and limitations ... 30

4. RESULTS ... 32

4.1 Characteristics of the sample ... 32

4.2 Descriptive statistics ... 34

4.3 Dynamic panel data model – relationship between innovations (standard and eco combined) and firm financial and market performance ... 35

4.4 Dynamic panel models – relationship between eco-innovations and firm financial and market performance ... 38

4.5 Dynamic panel models – relationship between eco-innovation type (standard, eco-product, eco-process, eco-organizational) and firm financial and market performance ... 41

5. DISCUSSION ... 46

5.1 Eco-innovations and financial performance ... 46

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vi

5.2 Eco-product innovations and financial performance ... 46

5.3 Eco-process innovations and financial performance ... 47

5.4 Eco-organizational innovations and financial performance ... 48

5.5 Standard innovations and financial performance ... 48

5.6 Eco-innovations and market performance ... 49

6. CONCLUSION ... 51

7. REFERENCES ... 53

8. APPENDIX ... 60

Appendix A: Table of analyzed firms and their type and year of innovations ... 60

Appendix B: Impact of innovations (both eco and standard) on ROA and OM ... 62

Appendix C: Impact of eco-innovations on ROA and OM ... 62

Appendix D: Impact of different types of eco-innovations on ROA and OM ... 63

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vii

List of tables

Table 1 Eco-innovation types ... 11

Table 2: Types of resources disposable to firms, based on the NRBV ... 16

Table 3 Company sample distribution ... 22

Table 4 Distributon of eco-innovations ... 24

Table 5 : Variables definition and measurement ... 26

Table 6 : Participation pattern... 32

Table 7 : frequencies of innovations ... 33

Table 8 : Frequencies of eco-innovations ... 33

Table 9 : Frequencies of different eco-innovation types ... 33

Table 10 : Frequencies of different sectors ... 34

Table 11: Descriptive statistics for the sample... 35

Table 12 The impact of innovations (eco and standard) on financial and market performance ... 37

Table 13 The impact of eco-innovations on financial and marke performance ... 40

Table 14 Impact of different eco-innovation types on financial and market performance ... 43

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viii

LIST OF ABRIVIATIONS

RBV: Resource based view

NRBV: Natural resource based view AIC: Akaike information criterion BIC: Bayes information criterion FP: Financial performance MP: Market performance ROA: Return on assets ROE: Return on equity

OM: Operating margin/ return on sales MC: Market capitalization

DY: Dividend yield TA: Total assets

LEV: Financial leverage IND: Industry

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1

1. INTRODUCTION

Sustainable development has become one of the main priorities of present-day companies. As a response, companies all around the world have initiated socially responsible practices. Thus, corporate social responsibility (CSR), has become one of the main firm strategies, to gain sustainable competitive advantage (Miralles-Quiros, Miralles-Quiros, & Arraiano, 2017).

These CSR strategies, which are made part of the business process, incorporate social, economic, and environmental actions (Cagarra-Navarro, Reverte, Gomez-Melero, & Wensley, 2016). Shareholders, as one of the firms’ main stakeholders, together with customers, suppliers, investors, and communities, take more into account social and environmental considerations, when deciding on their investments (Malik, 2014; Miralles-Quiros et al., 2017). Consequently, in order to gain easier access to financing on the capital markets and to increase the value of the firm, listed companies are keener to taking CSR actions (Malik, 2014; Miralles-Quiros et al., 2017; Caroline, 2013). However, the research is said to be particularly scarce, about the relevance of sustainability for the European investors (Miralles- Quiros et al., 2017). On this note, Cagarra-Navarro et. al (2016) point out, that the empirical studies on the relationship between CSR and firm financial performance have not led to a precise conclusion. Some studies show a positive relationship, others a negative relationship, and some even a neutral relationship. The authors argue that the reason for the lack of consensus is the general exclusion of the social innovation variable from these studies. Thus, most of the focus in previous studies has been on short-term economic performance, while failing to look at firms’ long-term strategies (Cagarra-Navarro et al., 2016).

Consequently, in order to get a clearer and wider picture of the relationship, the analysis of firms’ long-term strategies, encompassing social innovations is needed. Social innovations are viewed as innovations, which benefit the society, by developing solutions for social and environmental issues, and at the same time, they increase a company’s capacity for economic development. Keeping in mind that social innovations are part of CSR activities, CSR can be seen as balancing out the needs of stakeholders with the company’s need to make profit (Cagarra-Navarro et al., 2016). Some authors define CSR as a package of cross-sectional activities, including social, political, environmental, economic, and ethical actions (Carroll, 1999; Malik, 2014). The focus of this study will be narrowed to the environmental component of CSR and social innovations, making ecological innovations (eco-innovations), the focal point of our study. Following, the aim of this thesis is to test the relationship between firms’

introduction of eco-innovations, and their financial and market performance in the subsequent

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2 years. In order to provide a more comparable, clearer picture of the financial effects of eco- innovations, the thesis also aims to test the relationship between firms’ introduction of standard innovations and their financial and market performance in the subsequent years. The aim derives from the examined literature and its recognized research gaps, outlined in the proceeding pages.

The current pressing environmental and social concerns are one of the main drivers of the increased interest and attention given to the topic of eco-innovations. (Hojnik & Ruzzier, 2016b). It is widely accepted that in order to reach sustainable development, eco-innovations are one of the most feasible directions to take (Scarpellini, Gil, & Tarragona, 2016). Not only this but eco-innovations as a part of a new business model, are seen as a win-win situation.

Thus, the interest in eco-innovation is rapidly increasing in the business community. The increase in interest is demonstrated by the large increase in capital flows into eco-innovations.

The expected cumulative investment in eco-innovations was estimated to reach 10$ trillion by the year 2020 (Boons, Montalvo, Quist, & Wegner, 2013), this number might be impacted by the Corona Virus.

A definition of eco-innovations is employed from Kemp and Pearsons (2007) and is presented in detail in the theoretical framework, on page 8. Nonetheless, it is important to distinguish them from ecological investments. Eco-innovations are the direct result of ecological investments, which are perceived as proxies and prerequisites for firms’ facilitation and integration of product and production innovations that benefit the environment (Lee, Min, &

Yook, 2015). Ecological investments lead to technologies of product production or to products itself that reduce pollution (Bostian, Fare, Grosskopf, & Lundgren, 2016). Turning back to the definition of eco-innovations, these are novelties to the firm, which lower the environmental impact, compared to the present alternatives (Kemp & Pearsons, 2007).

According to Boons et al. (2013), there exists a consensus in the academic literature on the main determinants of eco-innovation. However, the economic consequences of their implementation are still being widely debated by scholars (Ghisetti & Rennings, 2014). Until now there exists an ongoing debate, regarding the relationship between eco-innovation and financial performance. Conventional research states that environmental investments solely increase the costs of the firm, without resulting in any financial gains (Lee & Min, 2015).

According to authors, such as Palmer, Oates and Portney (1995), improved environmental performance of firms brings higher prices and reduced competitiveness. The increased environmental costs reduce profit margins and can cause the competitive disadvantage of

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3 firms. While the traditional opponents of this line of thought, as Porter and Van der Linde (1995), claim that environmental investments increase financial returns in the long run, through increasing sales and cost reductions, leading to a market share expansion. This is due to the fact that eco-innovations are strongly related to investments into research and development (Ghisetti & Rennings, 2014; Lee & Min, 2015; Nishitani, Jannahb, Kanekoc, &

Hardinsyah, 2017; Rennings & Rammer, 2011; Song, Zhao, & Zeng, 2017). In general, the research on the relationship between eco-innovation and firm financial performance has been ambiguous, inconsistent, inconclusive, and lacking in consensus (Rennings & Rammer, 2011;

Lee & Min, 2015; Song et al., 2017). Conducted studies provided a mixed picture, 15% of the 37 empirical studies found a negative relationship, 55% found a positive relationship and 30%

of them found no relationship at all (Ghisetti & Rennings, 2014). The inconsistency of results can be assigned to different research methods, samples, and environmental performance evaluation systems (Song et al., 2017). Thus, according to Lee and Min (2015) more research is needed to examine the impact eco-innovations have on firm financial performance, in order to provide a solid and firm answer, which will encourage managers to strive to reach above- average simultaneous environmental and financial performance.

This is precisely what our research strives to do. As shown in the paragraph that follows, there is a considerable amount of research conducted on the relationship between environmental regulations, eco-innovation, and firm performance. However, little research investigated, which type of eco-innovations, incorporated into the environmental business strategy of a firm, leads to a win-win business situation (Florida & Davison, 2001; Boons et al., 2013).

This thesis contributes to the research area by looking at the relationship between each of the three types of eco-innovations in comparison to one another, and the financial performance of firms developing them, additionally comparing them to firms developing ―other‖ standard innovations.

As mentioned, regulations have been found as one of the most important drivers of eco- innovation in several studies. Empirical studies from the United States, Japan, and Germany show that national regulations are the main drivers of companies’ innovation decisions (Rennings & Rammer, 2011; Horbach, Rammer, & Rennings 2012). Thus, it can be seen that the external context is the main driver of eco-innovation investments and the main reason for differences in these investments between developed and emerging economies. Of the examined literature most of the studies focused on the relationship between eco-innovation and financial performance in emerging and transition economies (Cheng et al., 2014;

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4 Przychodzen & Przychodzen, 2015; Davidescu, Vass Paul, Gogonea, & Zaharia, 2015;

Hojnik & Ruzzier, 2016b; Nishitani et al., 2017; Song et al., 2017 Cai & Li, 2018; Santos, Rezende, & Basso, 2019). However, developed countries have important institutional, regulatory, and monitoring structure differences to those of emerging economies (Santos et al., 2019). For example, the Nordic countries have cultural norms and institutional structures that encourage a stakeholder orientation of the companies, which leads to their long-term profitability orientation (Preuß, 2017). Thus, the Nordic region presents itself as an appropriate locality to test the relationship between eco-innovations and financial performance (Hojnik & Ruzzier, 2016b).

Hence, the research question that this study tries to answer is; what is the relationship between the introduction of eco-innovations by Nordic firms and their financial and market performance in the subsequent years, and does it differ from the financial and market effects, caused by an introduction of standard innovations by Nordic firms?

This research question was answered, by the results of our study concurring with empirical research, that found a negative relationship between eco-innovations and financial performance. However, the biggest contribution of this thesis to the field is the application of a holistic view, showing that eco-process innovations are the most positively correlated with financial performance and by finding out, that a firm’s market performance is positively correlated with the making of standard and eco-organizational innovations, even when there is no significant effect of these innovations on profitability. These findings hope to shed a light and contribute to the overall shift towards eco-innovations in practice, by demonstrating positive market returns in sectors heavily dependent on fossil-based natural resources.

By applying the natural resource-based view of the firms (NRBV), as its main theoretical framework, the thesis contributes to the explanation of the theory’s concept of competitive natural resources and capabilities in practice, by looking into eco-innovations. There is a lack in the literature regarding the practical understanding of the NRBV resources and capabilities and the role they play in gaining a firm’s competitive advantage (McDougall et al., 2019).

The positive correlation between eco-process innovations and financial performance shows that the possession of sustainable resources and the connected strategies, namely pollution prevention and sustainable development, lead to firms gaining a competitive advantage.

The following section presents the background of the topic of eco-innovations and the background to the Nordic setting of the thesis, which is necessary for a better understanding

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5 of the theoretical framework, hypothesis development and, understanding of the research design, which follows afterward. After the theoretical framework and research design chapters, results are presented in a separate chapter, followed by a discussion and finally the conclusion, in chapter 6.

1.1 Background and the Nordic setting

In the 21st century, environmental issues are becoming as much as part of business life, as they are of politics (Przychodzen & Przychodzen, 2015). Already in 2002, management literature has focused on the relationship between being a ―green‖ company and being an economically successful company for some years. However, as with the link between CSR and financial performance, no consensus has been reached. One line of authors claims that environmental protection only introduces costs for the firms, while the other line of authors argues that environmental protection pays off for the firms in the long run (Schaltegger &

Synnestvedt, 2002). The same issue was addressed by Boons and Wagner (2009). They introduce two research perspectives that have emerged. The first one being the traditionalist view, which sees a negative link between environmental and financial performance.

Environmental investments are seen to cause extra costs and to increase production costs, with the increase in marginal costs. And the second being the revisionist view, which suggests a positive link between the two variables, due to the development of pollution preventing technologies, which lead to higher resource efficiency of firms. However, as noted before, there are still significant variations across studies, ranging from results that show negative and insignificant links, to those that portray moderately or strongly positive links. Cagarra- Navarro et al. (2016), Boons and Wagner (2009) argue that the analysis of the role of innovation, regarding the link between environmental and economic performance, is missing.

For many firms, innovations are the key to survival. Especially firms facing increased fuel costs and other financial and economic uncertainties have placed more emphasis on innovations, in particular eco-innovations (Doran & Ryan, 2012). Studies that examine the innovation-performance relationship suggest that successful innovations improve and enhance a firm’s business performance (Cheng, Yang, Sheu, & 2014). Further on Porter and Van der Linde (1995) recognized the contribution eco-innovations make on business performance.

Furthermore, the role of innovation and more specifically eco-innovation has been one of the prime interests of EU policies in the last years, due to its beneficial environmental implications and positive impact on the competitiveness of firms and countries that eco- innovate (Kesideu & Demirel, 2012; Davidescu et al., 2015). The EU sees eco-innovation as a

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6 crucial strategy for European firms to achieve resource efficiency, lowering their purchasing material costs, reducing their energy dependence, and gaining global competitiveness (Triguero, Moreno-Mondéjar, & Davia, 2014). The pro-environmental transformation of the international and national legal systems also supports the further promotion of eco- innovations (Przychodzen & Przychodzen, 2015). The 2008 financial crisis demonstrated how short-term profitability strategies of firms are not a sustainable business model (Boons, Montalvo, Quist, & Wegner, 2013). According to Boons et. al (2013), there exists a considerable amount of research on the main drivers of eco-innovations, however, there is a lack of knowledge on the link between eco-innovations and the creation of a sustainable business model, which leads to long-term profitability.

The remains of the section will now focus on the Nordic setting:

The Nordic setting was selected based on the previous literature’s findings on the main drivers of eco-innovations. Research shows that the demand as a factor together with environmentally conscious stakeholders are important drivers of eco-innovations. Societal pressures and countries’ environmental regulations, such as standards, emission charges, subsidies, and permits, are seen as equally important (Kesidou & Demirel, 2012; Hojnik &

Ruzzier, 2016a; Hojnik & Ruzzier, 2016b; Cai & Li, 2018). Thus, it is necessary to consider market/demand-pull factors and increasing pressures from the government, due to environmental policies and other institutional factors, to understand how different firms in different settings respond to pending environmental challenges (Triguero et al., 2013; Chen et al., 2014; Hojnik & Ruzzier, 2016a; Cai & Li, 2018).

The general public in the Nordic countries has high levels of environmental awareness and equally high are the political commitments to the environment (Nordic Council of Ministers, 2011). Various Nordic investment banks provide loans to companies and projects, that improve environmental competitiveness. Many industries are strictly regulated, by various technical standards, targets for energy consumption, and rules for connecting renewable energy sources to electricity grids (ibid). Because the literature assumes that the economic success and financial gains of a firm’s environmental protection activities depend on factors such as the extent of stakeholder pressures, consumer demands and willingness to pay for eco products/services, environmental and health regulations and level of technological development, the Nordic region presents itself as an appropriate locality to test these assumptions (Hojnik & Ruzzier, 2016b). Another factor that makes the Nordic setting

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7 interesting for our study is, that on the 2020 global 100 ranking of the most sustainable corporations in the world, the top three ranking corporations come from the Nordic region (two from Denmark and one from Finland) (Corporate Knights Index, 2020).

Based on this, Nordic companies should be acknowledging public environmental awareness, showcased through changed customer decisions/demand and stricter regulatory policies, on a higher level, than firms in other institutional settings. The necessity and advantages of developing eco-innovation thus become apparent to these firms (Tsai & Liao, 2016). Hence, a growing number of Nordic companies have presented new strategies for the integration of environmental protection in their overall business strategy (Florida & Davison, 2001). Thus, this kind of pro-environmental setting presents a good location to test the profitability and market performance of eco-innovations.

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8

2. THEORETICAL FRAMEWORK

2.1 Eco-innovation definition and characteristics

Since the thesis investigates the effect eco-innovations have on firm financial performance, it is important to first define the concept of eco-innovations, together with their main characteristics.

Park, Bleischwitz, Han, Jang and Joo (2017) denote that a strong role is ascribed to businesses, to reduce inefficient resource use, through improved and more efficient production processes, preventive strategies, and cleaner technologies. Hence, general sustainability requires firm innovations, in the field of implementation of new and improved products and processes and improvement or new organizational methods in business practices. Thus, it can be recognized that sustainability and firm innovation performance are strongly correlated with each other and impact one another (ibid.). From this understanding we can define eco-innovations as following:

According to (Cheng et al., 2014; Ghisetti & Rennings, 2014; Lee & Min, 2015), eco- innovations can be perceived as distinctive, green capabilities with a long-term focus, implemented by management support, R&D investment and eco-technologies. Commonly eco-innovations are defined in accordance with the Oslo Manual. The Manual (2005) sees them as either product or process innovation, and as either organizational or marketing innovation. These innovations reduce the environmental impact, either in the production phase or in the phase of utilizing the goods and services (OECD, 2005; Rennings & Rammer, 2011; Davidescu et al., 2015). Eco-innovations include a vast number of different innovation types, ranging from renewable energy technologies, pollution prevention schemes, waste management equipment to green products, and biological agriculture (Karakaya et al., 2014).

As already mentioned in the introduction, the most commonly cited definition of eco-

innovations, is that of Kemp and Pearsons (2007, p. 16), which states;

―Eco-innovation is the production, application or exploitation of a good, service, production process, organizational structure, or management or business method that is novel to the firm or user and which results, throughout its life cycle, in a reduction of environmental risk, pollution and the negative impacts of resource use (including energy use) compared to relevant alternatives”.

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9 Kemp’s and Pearson’s definition puts forward three distinctive characteristics of eco- innovations. Starting with the first one, the eco-innovation needs to be a novelty only for the firm that it is introducing it, however, it does not need to be a novelty for the market (Rennings & Rammer, 2011). This feature deviates from the traditional economic view on innovations, introduced by Schumpeter, which states that innovation is the first introduction of a product or service, process, and organizational structure to the market (Horbach et al., 2012). Secondly, the sole focus for an innovation to be characterized as an eco-innovation is on the positive environmental results it brings, and not on the motivation behind the firms shift towards the eco-innovation. And thirdly, the eco-innovation needs to be environmentally beneficial in comparison to the conventional alternatives (Rennings & Rammer, 2011;

Horbach et al., 2012). The OECD ascribes eco-innovations one further characteristic, the benefits presented by eco-innovations do not stop at boundaries of an organization, but they touch the broader society, by impacting and changing social norms, values, and institutional structures (OECD, 2009). Moreover, some definitions stress that the aim of eco-innovations is the more efficient use of natural resources, thus reaching eco-efficiency (Hojnik & Ruzzier, 2016b). There exist several other definitions, however, all of them reflect and highlight the already mentioned, reduced impact on the environment and more efficient resource use as their main consequences (Hojnik & Ruzzier, 2016a).

In this thesis, the definitions given above will be used. Based on the examined literature and the presented definitions of eco-innovations, three types of eco-innovations were identified as the most common and will be the focus of this thesis. These three types are based on the OECDs synthesis report on eco-innovations (2009). These are eco-process innovations, eco- product innovations, and eco-organizational innovations. The section continues with the identification of characteristics of these three eco-innovation types.

2.1.1 Eco-process innovations

In general, eco-process innovations can be defined as improvements of already existing production processes. Or it could also be referred to, as new production processes that contribute to the reduction of the environmental impact (Cheng et al., 2014). As simply put by the OECD (2009), eco-process innovations target the method of production or procedure.

According to Przychodzen and Przychodzen (2015), this type of innovation is adopted with the purpose of increasing eco-efficiency of already existing operations, by introducing a technological change. As a result of this technological change, operational processes, and systems of an organization are modified. The production cost per unit is decreased and new or

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10 modified eco-products are introduced and the overall environmental impact is reduced (Cheng et al., 2014). Technological capabilities within the firm are seen as the main and basic drivers of eco-process innovations (Triguero et al., 2013).

2.1.2 Eco-product innovation

Eco-product innovations target both, goods and services (OECD, 2009). This type of eco- innovation is characterized through the introduction of a new environmentally friendly product to the market or through the improvement of an existing product to be eco-friendlier (Triguero et al., 2013; Przychodzen & Przychodzen, 2015). These new or upgraded products improved in technical components as well as in their materials (Cheng et al., 2014). Thus, one of their main characteristics is higher energy efficiency, longer durability, and easier recyclability (Przychodzen & Przychodzen, 2015). To simplify, the aim of eco-product innovations is the reduction of the ecological impact throughout the product’s entire lifecycle (Cheng et al., 2014).

2.1.3 Eco-organizational innovation

Eco-organizational innovations target the management structure and responsibility distribution (OECD, 2009). This type of innovation is linked to the upgrade in the management processes of an organization, through the introduction of new eco-methods in business practices. It relates to the basic work activities of an organization and the organizations’ infrastructure (Cheng et al., 2014). These new methods can include the establishment of environmental divisions, establishment of multi-stakeholder or inter-sector environmental networks, or the implementation of environmental management systems (Triguero et al., 2013; Przychodzen & Przychodzen, 2015). The financial performance of the organization can be improved with these types of eco-innovations, with the reduction of administration and transaction costs and the reduction of supply costs (Cheng et al., 2014).

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11 Table 1 presents the summary of the three eco-innovation types:

Table 1 Eco-innovation types

Eco-process innovations Eco-product innovations

Eco-organizational innovations

Definition

New production processes or improvements of existing production processes

New environmentally friendly product or modified existing product

New management structure and responsibility

distribution

Aim Increase in eco-efficiency

Higher energy efficiency, longer durability, and easier recyclability

Upgrade in the management process - introduction of new eco- methods of business practices

Result

Environmental impact is reduced

Reduced ecological impact throughout the product’s entire lifecycle

Reduction of administrative, transaction and supply costs

Source: Author’s own work

2.2 Relationship between eco-innovations and firms' financial performance The interdisciplinary field of finance/accounting, innovation, and environmental studies, from which the thesis draws its content from, does not provide a comprehensive theory for eco- innovations (Karakaya et al., 2014). Therefore, the thesis will base its analysis and conclusions on the strategic managerial theories, primarily used to explain competitive (sustainable) operations.

As already mentioned in the introductory, the relationship between eco-innovations and a firm’s financial performance is a scorching topic. According to the theoretical framework, which will be presented below, firms that actively engage with eco-innovations should gradually improve their financial performance, due to the consequent better utilization of resources and other inputs and improved product yields (Hart, 1995; Porter & Van der Linde, 1995; Przychodzen & Przychodzen, 2015). According to Nishitani et al. (2017), there are two ways, how eco-innovations can improve a firm’s financial performance. First, through the increased demand, which is a result of the positive image and the products. The positive perception of consumers enables them to increase their market share and increase the price of their environmentally friendly products and services. Thus, this way is linked to eco-product innovations. The second way is connected to eco-process innovations, which improve productivity. These process innovations can be a change in technology, materials, water, and energy consumption, which enable firms to reduce fixed and variable costs. The following section will put the stated arguments into a theoretical framework.

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12 As already defined in the definition part of the theoretical framework, the basis of eco- innovations discussion can be defined around organizations' capabilities, internal resources, and performance. Deriving from this the resource-based view (RBV) and the natural resource- based view (NRBV) provide a good theoretical framework to analyze the contributions of firms' capabilities and resources on their financial performance, presented by one of the before described eco-innovations (Cheng et al. 2014; Lee & Min, 2015).

This section begins with an explanation of the RBV and follows with the description of the NRBV, which is a theory built on and directly deriving from the RBV.

2.3 Resource-based view

Strategic management theories have long understood that a firm’s competitive advantage depends on the relationship of its distinctive internal/organizational capabilities, and the external environmental circumstances, in which it operates (Hart, 1995). The RBV contributed to this field of studies by presenting the relationship between the firm’s resources, capabilities, and competitive advantage (ibid). The main idea of the RBV and to it connected the NRBV is that a firm’s competitive advantage is grounded in its heterogeneous resources, which are characterized as being valuable, difficult, and costly to imitate and non- substitutable. In order to create a competitive advantage, a firm needs to exploit these internal resources to its own advantage (Cheng et al. 2014; Lee & Min, 2015; Hojnik & Ruzier, 2016a; Cai & Lee, 2018). These resources are important determinants and generators of eco- innovations, especially important are technological capabilities (Cai & Lee, 2018). Therefore, internal resources and capabilities are the keys to a competitive advantage, as they enable firms to innovate new products and processes and offer new value to customers (Cheng et al., 2014).

The RBV is particularly applicable to explain the relationship between standard innovations, which in the case of our thesis mean, innovations that do not involve an ecological component, and their implications on financial performance. As it will be presented in the upcoming sections, one of the theories sees the development of eco-innovations, as shifting capital resources away from the firm’s actually profitable and productive investments, among other things investments into standard innovations. That is why the following section analyzes how standard innovations affect the financial performance of firms.

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13 2.3.1 Relationship between standard innovations and firms’ financial performance

Introduction and development of standard innovations is the product of intense competition pressures, shifting customer demands, and the general constant requirements for new, improved products and services (Kostopolous, Papalexandris, Papachroni, & Ionnaou, 2011).

Standard innovations are employed as effective responses to the external environment’s demands and internal requirements, leading to better adoptive behavior and financial performance (Jaskyte, 2020). Increased sales and firm growth are associated with firms that introduce innovative products and services, thus remaining up to date, as these new products/services are driven by constantly shifting customer demands and impulsive customer preferences (Kostopolous et al., 2011). By offering these new innovative products/services firms can create new demands, gain access to new markets and avoid price competition, thus enhancing their financial performance (Ho, Nyguen, Adhikari, Miles, & Bonney, 2018).

Successful innovations meet customer demands and requirements and further enhance the financial performance, by charging the customers on a premium price basis and increasing their purchasing frequency, connectively establishing customer loyalty (ibid.) Through the deep penetration into its established customer base and by launching innovative products/services to new customers, innovations also strengthen a company’s positional advantage, making it more resilient to competitors. This makes it harder for competitors to enter the market, giving the innovative company a competitive advantage (Kostopolous et al., 2011; Ho et al., 2018). According to the RBV, the companies that possess unique resources and capabilities, gain a competitive advantage, and achieve better financial results. In order to sustain their uniqueness and strategic value, these resources and capabilities need to be constantly renewed. The renewal is accomplished through innovation. Thus, the innovation process brings resource and capabilities based competitive advantage to the firm, which translates into superior financial performance (Jaskyte, 2020). Hence the first hypothesis presumes:

H1: Standard innovations, made by Nordic firms, lead to a better financial performance in the subsequent years.

2.4 Natural resource-based view

More closely connected to eco-innovations is the NRBV. Hart (1995) developed the NRBV, by building on the assumptions of RBV. The NRBV is based on the assumption that competitive advantage is generated from the firm’s reduction of its ecological impact (Boons

& Wagner, 2009). Hart (1995) added to the RBV, the opportunities and constraints presented

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14 by the natural environment. Historically, management theories and thus the RBV only understood the environment, as comprising of political, economic, social, and technological aspects, while excluding the natural environmental aspect (Hart, 1995). In the NRBV, the concept of environmental capabilities was developed and connected to environmental strategies and competitive advantage (Cheng et al., 2014; Lee & Min, 2015). To apply this to eco-innovations, the three beforehand described types of eco-innovations can be seen and considered as unique, rare, valuable, inimitable, and non-substitutable environmental capabilities. These capabilities were developed with various internal resources, like eco- technologies, green infrastructure organizational activities, and structure, which should contribute to competitive advantage and increased financial performance (Cheng et al., 2014).

Furthermore, the NRBV states that in order to achieve long-term success, the firms’ resources and capabilities need to be accumulated and managed with a long-term focus to the environment, instead of a short-term focus on profits, on the expanse of the environment. In order to make this long-term commitment, firms need to invest in R&D for new environmental technologies. R&D activities focused on eco-innovations improve internal resources. Thus, sustainable, environmental technologies and products lead to a competitive advantage on the market (Lee & Min, 2015).

NRBV expects that firms, which act pro-environmentally, develop strategic resources that foster positive economic returns. Thus, the firms’ profitability is positively influenced by the competitive advantage, which derives from the firm’s pro-environmental behavior (Ghisetti &

Rennings, 2014). However, this can not be simplified to the argument that firm sustainability presents itself as a resource, through which competitive advantage can be achieved. Only firms that identify and respond to the opportunities presented by the natural environment, by adopting sustainable resources, can expect sustainable advancements and reaching higher firm gains (McDougall et al., 2018). These resources are conceptualized as pollution prevention, product stewardship, and sustainable development. These resources are the product of internal organizational capabilities and the exploitation of external environmental issues (Hart, 1995;

McDougall et al., 2018). To look more thoroughly into them, pollution prevention's aim is to maximize efficiency and cutting costs throughout internal operations and production, with new capabilities. It does so by reducing waste and emissions, thus avoiding disposal costs and rationalizing internal operations (McDougall et al., 2018). Less waste means better utilization of inputs, leading to lower costs of raw materials and waste disposal. Furthermore, pollution prevention reduces the cycle time of production, by cutting or simplifying unnecessary steps.

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15 Hence, pollution prevention, for example through the end of pipe pollution control devices, facilitates lower costs, resulting in enhanced cash flow, leading to higher firm profitability (Hart, 1995). Product stewardship seeks for resource efficiency and cost cuts in external operations. The goal is the conservation and avoidance of harmful substances and striving for recyclabilty in the product's lifecycle. This is achieved by minimizing the use of non- renewable materials, avoiding the use of toxic materials and using renewable resources (Hart, 1995). Therefore, permitting firms to access scarce resources and create sustainable products, which are then used as a source of their competitive advantage, as the product has low life- cycle costs (Hart, 1995; McDougall et al., 2018). Lastly, sustainable development, which later literature conceptualized as clean technologies, is seen here as new manufacturing processes that support environmental advancements. A major part are investments in new technologies, in order to pursue environmental and sustainable operations, with long-term positive environmental impacts. The competitive advantage is thus achieved, through the creation of such new processes ahead of competitors (McDougall et al., 2018). For a firm, this implies sustainable investments and long-term market development. (Hart, 1995).

For the purpose of this thesis and its further analysis, as can be seen in table 2, eco-process innovations will be looked at as being part of both pollution prevention and sustainable development strategy. Eco-product innovations will be seen as a part of product stewardship strategy and organizational innovations, as part of the pollution prevention strategy. This classification is based on and inspired by the work of Pelin and Effie (2019), who categorized various eco-process and eco-organizational innovations into the sustainability strategy.

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16

Table 2: Types of resources disposable to firms, based on the NRBV

Pollution prevention Product stewardship Sustainable development

Aim

Efficiency maximization and cost cuts throughout internal operations and production

Resource efficiency, recyclabilty in the products lifecycle

Investing in new technologies, to pursue environmental and sustainable operations

Result

Waste and emission reduction, decrease in the production cycle time

Access to scarce resources, creation of sustainable products

New manufacturing processes, ahead of

competitors, which support environmental

advancements Eco-

innovation

Eco-process and Eco-

organizational innovations Eco-product innovations Eco-process innovations

Expected effects on performance

Lowering costs throughout production and internal operations; Consequence:

higher profitability, higher market value

Lowering costs throughout external operations;

Consequence: higher profitability, higher market value

Market development, increase in market share;

Consequence: higher profitability, higher market value

Source: Author’s own work

According to Boons and Wagner (2009), firms that possess green, environmental capabilities, like eco-innovations, can develop pro-active strategies, which make them more competitive in comparison to firms that lack such capabilities. Thus, according to Przychodzen and Przychodzen (2015), the NRBV assumes that the appropriate use of environmental capabilities, in our case eco-innovations, will lead to better financial performance, through cost reduction, profit increase, and higher competitive advantage. Bragdon and Marlin (1972) claim that pollution-control investments can reduce operating costs, by lowering costs of raw material input, lowering labor costs, decreasing taxes and legal costs to the authorities, decreasing purchasing costs, and lowering financial costs, by easily raising equity and funding debt. Further on, Przychodzen and Przychodzen (2015) claim that when the firm’s ability to manage environmental issues is inimitable to the competitors, non-substitutable, rare, and valuable, it may lead to an excess return on equity. Consequently, pro-environmentally orientated companies, are believed to generate higher profits. Adding to this Hojnik and Ruzzier (2016b) state that companies orientated toward eco-innovations experience an increase in company efficiency, productivity, and better product quality. Moreover, Ghisetti and Rennings (2014), Hojnik and Ruzzier (2016b) and Cai and Lee (2018) have found that eco-innovations, which improved the company’s resource efficiency, by saving material or lowering energy consumption, showed significant positive effects on companies’ profitability and its general competitiveness. This argument for eco-efficiency can be explained by the notion that pollution presents a waste of resources and unnecessary costs to the firm (Porter &

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17 Van der Linde, 1995; Dixon-Fowler et al., 2013). Finally, Przychodzen and Przychodzen (2015) argue that when the concept of eco-innovations is tightly integrated into the core business strategy, the firm’s competitive advantage will increase by attracting new environmentally aware consumers, thus increasing sales and generating higher profits. Shortly summarized, the increase in demand, generated by the better product quality, will lead to an increase in total sales, and improvements of productivity will reduce total costs, leading to an enhanced financial performance of the firm (Nishitami et al., 2017). Based on the explained literature the researcher proposes and predicts the following hypothesis:

H2: Eco-innovations, made by Nordic firms, lead to a better financial performance in the subsequent years.

However, not all literature sees eco-innovations as a source of competitive advantage, but rather the opposite. The following section presents the most dominant opposing view and builds the thesis’ third hypothesis.

2.5 Traditionalist view

As already mentioned in the introduction part, the traditionalist view sees a negative link between environmental and financial performance. Environmental investments are perceived as only leading to an increase in costs. The production costs of a firm increase, due to the increase in marginal costs, caused by the inclusion of the environmental component (Boons &

Wagner, 2009). This view, also known as the cost-based view, argues that the costs encountered by the firm, with the adoption of pro-environmental activities, lead to a reduction of the firm’s productivity and to a decrease in their competitiveness (Doran & Ryan, 2012).

Meaning that firms can either protect the environment or maximize profits, each can be accomplished only on the expanse of the other, there exists a tradeoff. Hence, investors can choose in investing in either profitable or ―good‖ companies; however, there exists no company that is both (Bragdon & Marlin, 1972). It is further stated that, if eco-innovations were profitable, firms would freely engage with them, not only when institutional and regulatory pressures force them to so (Doran & Ryan, 2012). This argument is based on the orthodox economic theory, where a firm combines two inputs, to produce the maximum output of a given product. One input can be clean water and the second input can be an investment in pollution control equipment. The solution is almost never to use one or the other input exclusively; rather it depends on the relative price of each input. However, due to the forced environmental and pollution standards, firms are forced to invest and use the

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18 pollution control equipment, which comes at a relatively high price, increasing their costs (Bragdon & Marlin, 1972) Thus, as the development of eco-innovations is not a free-willed choice of a firm, the firms are forced to shift their labor and capital resources toward eco- innovations, and away from, for them actually productive and profitable investments, decreasing their competitive advantage (Doran & Ryan, 2012). Hence, the third hypothesis presumes:

H3: Eco-innovations, made by Nordic firms, do not lead to better financial performance in the subsequent years.

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19

3. RESEARCH DESIGN

This section presents the methodological design for the thesis, by introducing the research strategy, the methods of data collection and the data analysis, as well as the issue of data quality and the limitations of the thesis.

3.1 Research method and strategy

In this thesis secondary data (financial data) was collected from the company fact sheets of Nordic firms listed on the Stockholm Stock Exchange (Nasdaq Nordic), from the Dalarna University online retriever of Swedish companies, datastream of Swedish listed companies and the remaining financial data was retrieved from companies’ annual reports and the research platforms Macrotrends and Simply Wall St. As the collected secondary data for measuring variables of this thesis is numeric, the method of analysis of these variables was done through statistical models and the aim of the study was to report the relationship between the studied variables, a quantitative research design was employed in this thesis (Alifieri, 2015). According to Sanders, Lewis and Thornhill (2016), quantitative research design is associated with the data collection and data analysis techniques that use numerical data. Further on the main characteristic of a quantitative research design is its examination of a relationship between variables (ibid), which is exactly what this thesis intended to do, by testing the relationship between eco-innovations and a firm’s financial performance, thus making a quantitative analysis an appropriate research design.

Quantitative research is usually associated with the deductive research approach, where an existing theory and from it deriving hypotheses are tested using the collected data (Sanders et al., 2016). Due to the abundance of theories and concepts in the fields of innovation and management, this approach was considered appropriate. Thus, the thesis tested the RBV, NRBV and traditionalist theories, and the three derived hypotheses, about the relationship between the concepts of eco-innovations (either eco-product, eco-process or eco- organizational) and standard innovations, which represent the independent variable, towards the firm’s financial performance and market performance, which was measured with several dependent variables (ROE, ROA, operating margin, market capitalization). Hence, as the thesis tested and explained the relationship between the mentioned variables, an explanatory research approach was selected (Sanders et al. 2016).

The research applied the experiment research strategy. This research strategy has been chosen, as its purpose is to examine the probability that a change in an independent variable

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20 will lead to a change in a dependent variable (Sanders et al., 2016). This directly applies to the author’s research, where the change in the independent variable, in the thesis case, the introduction of an eco-innovation, will affect or not affect the dependent variable, firm’s financial and market performance. Further on, as the research is based on secondary data, the researcher needed to look also at companies consolidated annual reports or their sustainability reports, companies news or press releases, lists of products, projects, and operations, on firms’

web pages, to establish, when or whether a firm has or has not made eco-innovations. Thus, an archival/ documentary research strategy was also applied inside the experimental research strategy. According to Sanders et al. (2016), this strategy is based on digitalized secondary data, that is accessible online.

Due to the fact that this research analyzed the change in the dependent variable – financial performance over a period of more than ten years, since the introduction/or not introduction of an eco-innovation, a longitudinal time horizon study was applied. The main aim of this type of study is the ability to analyze change and development (Sanders et al., 2016).

3.2 Sampling technique

The research population of this thesis consists of listed Nordic firms. For the purpose of this research, these firms were restricted to those being listed on Nasdaq Nordic and operating in the energy sector, manufacturing sector, and the basic materials sector. Resulting in a population of 268 firms. The following three sectors were chosen due to the reason that according to Ghisetti and Rennings (2014), the firms operating in these sectors are more affected by climate change and environmental issues, therefore having higher incentives to develop green strategies, due to the higher financial importance. The firms in sectors with negative environmental reputations, experience greater pressures from governmental authorities, through environmental regulations, from consumers and NGO’s and face greater media attention. Forcing them to keep their legitimacy, through investment in environmental activities (Clarkson, Richardson, & Vasvari, 2008; Dixon-Fowler, Slater, Johnson, Ellstrand,

& Romi, 2013). Furthermore, the companies must face a certain degree of competition in the market; otherwise, the environmentally inefficient behavior will barely affect the companies’

profit (Schaltegger & Synnestvedt, 2002). To elaborate further, the energy sector was chosen for this study, as it makes direct contributions to the economy and growth and is tightly linked with other sectors. The energy sector influences the sustainability of the entire economy with its potential resource efficiency. Thus, in order to maintain the health of the energy production, eco-innovations, with their increased efficiency and new technologies are needed

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21 (World Economic Forum, 2012). Now turning to the manufacturing sector, this sector accounts for a large part of the world’s consumption of resources and is a big generator of waste, as well as it reports a third of the world energy use (OECD, 2009). It generates approximately 20% of all greenhouse gas emissions in the EU. Because the manufacturing sector is heavy for the environment and it presents a huge innovative potential, eco- innovations are considered of significant importance in this sector (Ghisetti et al., 2017). And lastly, the basic materials sector was selected for this study, due to the growing demand for basic materials in the many key economic sectors, such as automotive, aerospace, and renewable energy. If the growing demand for these products is to be met, environmentally efficient and sustainable supply of metals, steel, minerals, wood products, etc., needs to be present. Such sustainable, eco-innovative solutions for the sourcing of materials, generate economic growth, and reduce the dependency of countries on foreign imports (European Commission, 2016).

The relatively big research population of 268 firms, prevented the researcher from the conduction of a census, due to the time constraints of the study. The total data gathering part and the appropriate arrangement of this data, took the research three weeks for 50 companies, making it impossible to analyze 268 companies, in the given time frame. Consequently, sampling was applied to the thesis. The sampling technique used is non-probability sampling, using the purposive sampling technique. This sampling technique was applied, instead of the random sampling technique, due to the reason, that the sample size of 50 companies, does not by itself capture all three sectors, different firm sizes, all four innovation types and, non- innovating firms, needed to appropriately fulfill the aim of the thesis. The researcher started her purposive sampling in each of the three sectors, the author firstly chose the top ten biggest companies by their overall turnover. These companies were chosen as they have the most financial and resource capabilities to shift toward eco-innovations. In the energy sector, the researcher chose the six biggest oil and gas companies and four biggest companies from the electricity industry, in order to have a more diversified sample, not comprising of only oil and gas companies. With the aim to increase the sample size of analyzed companies, especially those that have not introduced any type of innovations, and to have a more diversified sample, comprising of all firm sizes, the researcher purposively selected 20 more companies, mostly with medium and small market capitalization. This left the study with a sample of 50 companies, which represents 18.7% of the total population. Out of the 50 companies, 19 operate in the manufacturing sector, 14 in the energy sector, and 17 in the materials sector.

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22 The sectors are not proportionally represented, due to the purposive sampling technique, where the researcher was looking for non-innovative and medium and small-sized companies, as well as due to the reason that the number of listed energy and materials companies on the Stockholm Stock Exchange is significantly lower, compared to the number of listed manufacturing companies. Table 3 gives a summary of the sample in comparison to the total population.

Table 3 Company sample distribution

Nasdaq Nordic sector All companies Percentage of

Sampled

companies Percentage all companies companies of population Energy (oil and gas,

utilities) 50 18.7% 14 28%

Manufacturing (Industrials) 178 66.4% 19 10.7%

Materials 40 14.9% 17 42.5%

Total 268 100% 50 18.7%

Source: Author’s own work

3.3 Measures

To measure and identify if a firm made eco-innovations, the researcher based the research on the measurements developed by Kemp and Pearsons (2007). The first measurement is called input measures, and it consists of R&D expenditures and innovation expenditures. The second one is an intermediate output measure, consisting of patents. The third measurement is a direct output measure, which includes data on new product sales. Lastly, the fourth one is an indirect output measure, consisting of company information on innovation and eco-innovation performance. However, as from the R&D expenditures and patent expenditures, it was not possible to distinguish how many of these expenditures were connected with eco-innovations, the researcher predominantly employed the fourth measurement. R&D expenditures and patent expenditures were left as supportive variables. As already mentioned in order to establish and categorize the time frame and if a firm made eco-innovations or standard innovations, and which type of eco-innovations, the researcher examined companies consolidated annual reports or their sustainability reports, companies’ news or press releases and lastly lists of products, projects, and operations on firms’ web pages. Most of the data on the existence of whichever type of innovation was found in the sustainability reports/consolidated annual reports. The researcher used the following search words in these reports to look for eco-innovations: ―environment‖, ―innovation‖, ―innovative‖,

―sustainability‖, ―sustainable‖, ―research and development‖, ―R&D‖ and ―research‖. All of

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23 the study’s used search words are based and derived from Konnola, Carrillo- Hermosilla and Del Rio’s (2008) paper, which designed a framework for categorizing eco-innovations. As it was sometimes hard to identify from the reports in which year a particular innovation was made, the researcher looked at the news releases, to pinpoint the year of the introduction of the (eco) innovation. To easily identify eco-product innovations the researcher looked at the lists of patented products. Eco-product innovations were also identified by searching the reports and press releases with the search words; ―eco-efficient product‖, ―energy-efficient product‖, ―energy-saving‖, ―lifespan‖, ―lifecycle‖, ―energy reduction‖, ―fuel reduction‖,

―waste reduction‖, ―environmental solution‖, ―resource reduction‖, ―alternative product‖,

―product design‖, ―development‖, ―renewable‖, ―bio-fuel‖ and ―fossil-free‖. The process for eco-process innovations was the same, here the search words were replaced with: ―energy- efficient technology‖, ―energy production‖, ―new technology‖, ―sustainable technology‖,

―optimization project‖, ―optimized production technology‖, ―recycling process‖, ―reduced consumption‖, ―environmental footprint‖, ―technological innovations‖, ―disposal system‖

―reused‖, ―remanufacturing‖ and ―emissions cut‖. To continue eco-organizational innovations were searched for, with the following search words: ―environmental management plan‖,

―waste management plan‖, ―environmental business development‖ and ―bio-economy‖.

Lastly, standard innovations were found by searching for words, such as: ―new solution‖,

―product development‖, ―digital innovation‖, ―operational efficiency‖ and ―production increase‖. In the case of UPM and Stora Enso, two types of eco-innovations were found to be made in the same year. Due to the fact, that having two types of eco-innovations coded in the same year, presented issues to successfully running the models in STATA 16, the researcher decided to purposively select only one eco-innovation for the given year, for each of the two companies. In the case of Stora Enso, the researcher selected the eco-process innovation for the year 2014, instead of the eco-organizational innovation. This can be justified with the fact, that the researcher perceived the energy-efficient technology, they newly applied into making pulps, as a more substantial eco-innovation, compared to the company’s collaboration with an innovation center, based in Stockholm, which focuses on renewable market opportunities.

While in the case of UPM, the researcher chose the eco-organizational innovation over the eco-product innovation for the year 2015. The reason for this is, that UPM’s collaboration with the Green Campus Innovation institute, on the development of bio-technology, was viewed by the researcher, as playing a more significant role, than the introduction of a product containing lignin, by a paper company. In the end, the researcher was left with a sample of 16 companies who made eco-product innovations, 18 who made eco-process innovations, 5

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