Drivers of different types of eco-innovation in European SMEs

- Entrepreneurs valuing collaboration with research institutions eco-innovate more.
- Supply-side factors foster processes and organizational eco-innovation.
- Managers valuing cost-saving factors are only more prone to process eco-innovation.
- Market share factors only influence product and organizational eco-innovation.
- Expected regulations and access to subsidies/incentives do not affect eco-innovation.

In this paper we explore the drivers of different types of eco-innovation in European SMEs. Drawing upon a database of 27 European countries, empirical evidence is found for the different roles of supply-side, demand-side and regulatory factors in encouraging the adoption of different types of eco-innovation. Our empirical strategy consists of the estimation of a trivariate probit model. Our results show that those entrepreneurs who give importance to collaboration with research institutes, agencies and universities, and to the increase of market demand for green products are more active in all types of eco-innovations. Supply-side factors seem to be a more important driver for environmental processes and organizational innovations than for environmental product innovations. The results also show that market share only has a significant positive influence on eco-product and eco-organizational innovations, while cost-savings are solely significant for eco-process innovations. Finally, prioritizing existing regulations shapes eco-product and eco-organizational innovations while expected regulations and access to subsidies and fiscal incentives do not have any significant effect on the decision to eco-innovate in Europe at the firm-level.