Green R&D for eco-innovation and its impact on carbon emissions and firm performance

Over the past four decades, the results of the debates about the relationship between corporate environmental performance and corporate financial performance have remained inconclusive, due to the lack of theoretical underpinning and availability of data. This paper examines the impact of green research and development investment for eco-innovation on environmental and financial performance. The research is based on the resource-based view and the natural resource-based view, which explicitly recognize the importance of resources and capabilities. Using a sample of Japanese manufacturing firms during the period of 2001-2010, the study focuses on green research and development investment as a key proxy of eco-innovation and carbon emissions in environmental performance. Our results show the presence of a negative relationship between green research and development and carbon emissions, while green research and development is positively related to financial performance at the firm level. Our findings explicitly support that, in order for firms to adopt a proactive environmental strategy to manage their environmental and financial performance to the best advantage, they urgently need to organise unique resources and capabilities. The findings of this study provide valuable insights and basis of scientific debate on how firms to engage unique organizational resources and capabilities for superior corporate environmental and financial performance.