The problems of environmentally involved firms: innovation obstacles and essential issues in the achievement of environmental innovation

Accepted Manuscript The problems of environmentally involved firms: innovation obstacles and essential issues in the achievement of environmental innovation Jaime E. Souto, Angel Rodriguez PII:

S0959-6526(15)00360-1

DOI:

10.1016/j.jclepro.2015.04.017

Reference:

JCLP 5378

To appear in:

Journal of Cleaner Production

Received Date: 19 May 2014 Revised Date:

19 March 2015

Accepted Date: 6 April 2015

Please cite this article as: Souto JE, Rodriguez A, The problems of environmentally involved firms: innovation obstacles and essential issues in the achievement of environmental innovation, Journal of Cleaner Production (2015), doi: 10.1016/j.jclepro.2015.04.017. This is a PDF file of an unedited manuscript that has been accepted for publication. As a service to our customers we are providing this early version of the manuscript. The manuscript will undergo copyediting, typesetting, and review of the resulting proof before it is published in its final form. Please note that during the production process errors may be discovered which could affect the content, and all legal disclaimers that apply to the journal pertain.

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The problems of environmentally involved firms: innovation obstacles and essential issues in the achievement of environmental innovation

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Jaime E. Souto Autonomous University of Madrid, department of Business Management, Ciudad

Angel Rodriguez

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Universitaria de Cantoblanco, Cantoblanco, Madrid, 28049 (Spain)

Complutense University of Madrid, department of Financial Economics and

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Accounting, Campus de Somosaguas, Pozuelo de Alarcón, Madrid, 28223 (Spain) European University of Madrid, department of Economy and Finance, C/ Tajo s/n,

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Villaviciosa de Odón, Madrid, 28670 (Spain)

Corresponding author: Jaime E. Souto

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Autonomous University of Madrid

Department of Business Management, Ciudad Universitaria de Cantoblanco,

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Cantoblanco, Madrid, 28049 (Spain) Email: [email protected]

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The problems of environmentally involved firms: innovation obstacles and essential issues in the achievement of environmental innovation

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Abstract

Environmental innovation has been discussed from different approaches in the last decade, due to its increasing importance for business competitiveness and as an engine for the economic development of a country, especially in recessionary economic phases.

However, the study of the factors that hinder the achievement of environmental

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innovations has been largely neglected. This paper focuses on the obstacles facing firms

involved in environmental innovations and how they still manage to achieve these

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innovations. The data used comes from the Community Innovation Survey (CIS) conducted in Spain in the year 2012, while the Wilcoxon-Mann-Whitney test and binary logistic regression are the statistical techniques used. The findings show that the obstacles that companies involved in environmental innovations face are greater and different to those faced by companies which are not involved in them. Consequently, environmental innovation requires different action plans from those for nonenvironmental innovation; these actions include public funding, and cooperation, as

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well as other specific support measures. This research provides a systematic framework for environmental innovation and the ways to overcome the barriers to this innovation. Thereby supplying a roadmap for the creation of an innovation system that constitutes a favourable context for overcoming these obstacles, thus bringing about the success of

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the environmental innovation process through certain critical factors.

Highlights

- It is necessary to distinguish between financial and knowledge obstacles. - The factors hindering innovation are accentuated in environmental innovation. - Cooperation and public funding are important in environmental innovation. - Environmental innovation barriers are addressed systematically and comprehensively.

Keywords: environmental innovation, public funding, cooperation, obstacles to environmental innovation.

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1. Introduction

In recent decades, concern about environmental economics (Janicke, 2008; Kneese,

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1977; Mani and Wheeler, 1998), sustainable development (Ayres, 1978; Schaper, 2007; Shaw and Kidd, 2001) and corporate social responsibility (Aras and Crowther, 2009; Jackson and Apostolakou, 2010; Van Bommel, 2011) has increased progressively at a

global level. Thus, it is necessary to articulate appropriate technological and environmental policies (Baumol and Oates, 1979; Magat, 1982; Vig and Kraft, 1990),

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supported by a consolidated and stable political and institutional environment (Yandle, 1989), which stimulate growth and competitiveness in productive and exporting

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economies (Fleith et al., 2014; OECD, 1999; Stallings and Peres, 2000).

Moreover, in the general framework of corporate social responsibility (CSR), companies are becoming increasingly sensitised to the achievement of specific objectives which are conducive to the protection of the natural environment, or reduction of the environmental impacts that are generated by the production of goods or the provision of services relating to the various activities that they carry out (Bansal and

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Roth, 2000; Cuerva et al., 2014; Robbins, 2001). Indeed, numerous studies show the implementation of environmental strategies and actions as priorities for achieving economic returns in corporations (Da Silva et al., 2009; Hallstedt et al., 2013; Singh et al., 2008), with the aim of promoting such strategies and analysing when and how they

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can generate economic return (Boons and Lüdeke-Freund, 2013; Verbeke et al., 2006).

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In addition, the research by other authors focuses on the analysis of the different types of environmental management systems (Netherwood, 1998), comparing the different strategic options for environmental management among small and large businesses (Dilts and Prough, 1989; Russo and Tencati, 2009). Other studies analyse the influence of managerial and organisational factors as determinants of the choice of an appropriate corporate environmental strategy (Hallstedt et al., 2013; Sharma, 2000), evaluating environmentally conscious business practices (Sarkis, 1998; Tseng et al., 2011), and ultimately controlling and auditing the environmental management systems and their results (Melny et al., 2003; Taylor et al., 2001).

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It should also be noted that the literature devoted to the analysis of environmental impact management performed by small and medium enterprises (SMEs) is extensive (Klewitz and Hansen, 2014). Especially noteworthy are those studies addressing the identification and analysis of the various factors that determine the efforts of SMEs to

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increase their environmental awareness and reduce the impact on the natural environment (Gadenne et al., 2008; Petts et al., 1998; Williamson and Lynch-Wood, 2001).

On the one hand, other research papers analyse the relationships between environmental

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responsibility and the achievement of competitive advantages (Simpson et al., 2004),

among different environmental management systems and the problems arising from

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SME size (Biondi, 2000; Gerstenfeld and Roberts, 2000; Williamson et al., 2006), or address the enhancement of those environmental actions and practices already consolidated (Friedman et al., 2000; Roberts et al., 2006; Rowe and Hollingsworth, 1996). Regarding the geographic scope, although many researchers address a specific national scope – as for example, the research undertaken by Naffziger and Montagno (2003) concerning the perceptions of environmental awareness in small businesses in the United States, Tilley (1999), which addresses the environmental strategy of small

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businesses in the UK, and Schaper (2002), which focuses on the environmental management of small pharmaceutical companies in Western Australia –, other researchers, such as Rutherfoord et al. (2000) develop international comparative studies.

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On the other hand, environmental innovation has been discussed from different approaches in the last decade (Chen et al., 2012; Buysse and Verbeke, 2003). However,

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the factors that hinder the achievement of environmental innovations have been neglected (Keskin et al., 2013), despite the fact that environmental innovation is increasingly important in achieving competitive advantages (Boons et al., 2013; Chiou et al., 2011; Eiadat et al., 2008). In other words, the necessary attention has not yet been given to those firms facing barriers to environmental innovation nor to the existence of differences in the innovation obstacles faced by firms involved in environmental innovations and those firms which are not involved in them.

The aim of this paper is to address the obstacles to environmental innovation through an analysis of the differences between the firms involved in environmental innovations and 3

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those firms that are not involved in them. To complement this approach to environmental innovation obstacles, it also analyses the critical aspects in overcoming

2. Environmental and business innovation

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them.

At present, the role played by innovative and technology-based companies as drivers of

economic development (Cabrera and Soto, 2010; Donkels and Pierre, 1990; Hamel,

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2006) is essential, even more so in the light of a global economic environment in crisis

(Fagerberg, 2005; Souto, 2012); this is, above all, due to their usefulness in the

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development of more competitive firms (Dossi, 1988; Geroski, 1995; Schneider and Veugelers, 2010) in increasingly interconnected markets in which technological life cycles are becoming shorter (Schumpeter, 1939).

In this context, the Oslo Manual conceived innovation as the design and implementation of significant changes in the product, process, marketing or organisation of the corporate economic unit, in order to improve its results (OECD and EUROSTAT,

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2005). Thus, innovative changes are performed by the application of new knowledge and technology, which can be developed through three procedures: firstly, internally; secondly, through external collation; or thirdly, acquisition through advisory services or the purchase of technology (Bessant and Tidd, 2009; Fagerberg, 2005). In this regard,

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innovation activities would encompass all those scientific, technological, organisational, financial and trading actions that lead to innovation, taking into consideration both the

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activities that have proven successful, as well as those that are in still in progress or formed part of projects since terminated for lack of viability (Smith, 2005).

The Oslo Manual also defines an innovative company as one that has introduced at least one innovation or innovative activity, although this may not yet have yielded any results (OECD and EUROSTAT, 2005). Furthermore, Smith (2005) highlights the difficulty in measuring innovation through the volume of expenditure on R&D in the company, given that, although it is a measure that can be taken into account when combined with other indicators, such as the income from products introduced into the market in the last two years, it does not measure the training in innovation activities received by 4

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employees, or other costs not identified by the company as belonging to R&D. In addition, innovative companies have been proved to have higher growth rates than those that are non-innovative, with regard to increased product turnover (Souto, 2012). This is achieved through the use of new knowledge or a new combination of existing

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knowledge, through the development of activities of product innovation, process innovation, marketing innovation, and, ultimately, innovation in organisation (Bessant and Tidd, 2009; Dossi, 1988; OECD and EUROSTAT, 2005).

Moreover, in the private business sector the combined effects of the international

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financial crisis and the evolution of global climate change have promoted the progress

and development of sustainable business (Boons et al., 2013) and environmental

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innovation (Potts, 2010; Reid and Miedzinski, 2008; Tseng et al., 2012), leading to the genesis of a wide range of products and services oriented towards the environment (Chang and Fong, 2010; Fleith et al., 2014; Keskin et al., 2013). In addition, national governments are formulating environmental policy activities and dynamics, involving public availability of investments for the development of green economies, as one response to the global financial crisis. Authors, such as Potts (2010), also stress the importance of developing a regional scale model, based on the natural advantage that

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integrates innovation and environmental sustainability, as part of the regional development policy agenda, by creating business networks and sustainable communities, while others such as Arnaud and Sekerka (2010) analyse the ethical

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aspect of introducing innovation in support of environmental sustainability.

Other works such as Tseng et al. (2013) evaluated the practices of sustainable

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innovation in Taiwanese corporations, analysing factors that focused on process management, product innovation and technological aspects, while several studies examined the effects of environmental innovation on the competitive advantages of firms (Chiou et al., 2011; Eiadat et al., 2008; Shrivastava, 1995), the selection of specific environmental technologies (Klassen and Whybark, 1999; Tseng, 2010), the integration of suppliers in the development of eco-innovation (Lee and Kim, 2011; Zailani et al., 2011), and environmental sustainability of the supply chain for the cases of China and Japan (Zhu et al., 2007; Zhu et al., 2010; Zhu and Sarkis, 2006). There has also been some interesting work on environmental innovation management in SMEs (Cuerva et al., 2014; Klewitz and Hansen, 2014; Noci and Verganti, 1999). 5

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Finally, the work of Chen (2008) should be noted for the correlation between environmental skills investments and its positive results in relation to improvements in eco-innovation and the green image of large corporations in the field of media and the

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electronics industry in Taiwan; these large companies have the advantage of size compared to the SMEs in their sector (Seuring and Müller, 2008), which ought to

encourage them to further seek this type of innovation and image, and thus improve the results achieved in this area.

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Likewise, it is important to highlight the studies on the different reactive and proactive environmental innovation strategies by Buysse and Verbeke (2003) and Chen et al.

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(2012), which analyse and propose a theory about the origins of the two types of green innovation: proactive derived from internal sources, such as environmental leadership and culture; and reactive, which is derived from external sources, namely, environmental regulations and the environmentalism of the stakeholders. The research concludes that only internal sources can facilitate proactive green innovation, suggesting that companies should invest their resources in the stimulation of internal

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sources rather than external sources.

3. The issue of innovation in the enterprise: cost and knowledge factors

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However, the way forward for technology-based companies is full of obstacles to be overcome, which prevent both its creation and subsequent development and

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consolidation (Keskin et al., 2013). In particular, this paper focuses on five specific problems (Blanchard et al., 2012; D’Este et al., 2012; Madrid-Guijarro, 2009) that innovative companies concerned about the environment and the protection of the natural environment may have, and the comparison with the same problems that could arise in those firms which are not concerned about environment, following the model proposed by the Oslo Manual in this particular area (OECD and EUROSTAT, 2005).

The Oslo manual identifies and selects a set of economic or cost factors that may arise as barriers to business innovation (OECD and EUROSTAT, 2005) and synthesizes them into three possibilities. On the revenue side, the first is the lack of internal funds of the 6

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company (share capital, reserves) and the second is the lack of external financing (funds from affiliated companies, such as subsidiaries or associates; loans from financial and non-financial companies; venture capital; public funding through loans or grants; funds from international and supranational organisations). Finally, the third is related to the

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excessively high cost of innovation activity (current expenditure on innovation and investment in fixed capital devoted to innovation). This type of barrier to innovation can occur in any type of product innovation, process, marketing or organisational activity, as cited above. Indeed, the confluence of these factors, namely the high cost of

innovation, lack of external funding and limited internal financial resources, constitutes

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a serious problem for the development of innovative business (Falk, 2007; Souto,

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2012).

The funding problems mentioned above are accentuated in innovative start-ups and small sized firms, in which the access to external funding and the scarcity of internal funds is conditioned by the lack of a consistent and stable income. In addition, such companies are characterised by a lack of reserves, as a result of not having reached the threshold of profitability, and above all, by the lack of experience and an established business track record, which makes it difficult for them to generate the confidence of

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investors and potential lenders. All this implies little leeway in relation to the ability of these companies to provide assurance to stakeholders (Schneider and Veugelers, 2010). According to several scientific studies, these barriers to innovation are very similar in different countries, such as the United Kingdom (Ganotakis and Love, 2011), Belgium

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(Donkels and Pierre, 1990), and Germany (Almus and Nerlinger, 1990; Schneider and

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Veugelers, 2010).

There is another set of factors that bring about barriers to innovation, which are linked to knowledge (OECD and EUROSTAT, 2005). These can be subdivided into the two following: (1) the lack of trained or qualified personnel (within the company or in the labour market) capable of developing this type of activity, and (2) the difficulty in finding partners that cooperate in the development of business innovation activities. Thus, poor management or even the absence of an implicit knowledge internalised by a specific group of people, can be a major obstacle to innovation. In addition, Palop and Vicente (1999) and Shank (2007) stress the importance for the company to clearly identify the generators of knowledge of their environment, such as public research 7

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centres or private universities, technology parks, etc. Thus, the most important task lies in integrating acquired codified environmental knowledge with the knowledge base of the business unit, making it value-added information which is useful for decision making (Palop and Vicente, 1999) and, in this respect, the existence of trained and

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skilled personnel is configured as critical.

Finally, the difficulty in finding partners that cooperate in the development of business

innovation activities, can also be a significant obstacle to innovation, as innovative

companies in constant contact with their environment need to cooperate and update

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available knowledge (Becker and Dietz, 2004; Becker and Peters, 1998; Souto, 2012),

with the aim of avoiding any loss of competitive advantages (Fleith et al., 2014),

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especially those small sized companies with limited financial resources (McDougal et al., 1994). Other authors emphasise the importance of cooperation for access to new markets or complementary resources, or as an exchange of experiences for synergistic problem solving (Uljin et al., 2007). Lastly, there is the importance of strategic alliances

4. Methods

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as a source of steady growth for innovative companies (Donkels and Pierre, 1990).

The Statistical Office of the European Community (EUROSTAT), in coordination with the Organisation for Economic Cooperation and Development (OECD), has designed a

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methodology for collecting innovation data. In particular, in 1993 the Eurostat proposed the first Community Innovation Survey (CIS), with a data collection questionnaire

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harmonised for all members of the European Community. At present, the results of these efforts and the work of both institutions are embodied in the Oslo Manual (OECD and EUROSTAT, 2005), which is the methodological basis for data collection by the Community Innovation Survey (CIS). Moreover, the Oslo Manual contains widely accepted guidelines for the collection and use of data on innovation.

Furthermore, the frequency of the survey is biennial, but in Spain the survey is conducted every year, enabling the creation of a unique data panel; the Spanish innovation survey questionnaire includes twenty pages, four of which correspond to definitions. 8

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The data used in this paper comes from the Community Innovation Survey (CIS) conducted in Spain in the year 2012. Specifically, it is integrated in panel data from 2004 to 2012, which covers 12,828 companies. The living sample in 2012 was 10,470

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firms, as the remaining 2,358 companies were either no longer accessible or had since disappeared. The response ratio was 95.1% (9,977 firms). After eliminating "do not know" or "no answer" responses to any of the questions subject of this study, 6,553

valid questionnaires were obtained. The sample comprises 44 industries, covering

primary, secondary and tertiary sectors. Companies in the secondary and tertiary sectors

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make up almost the entire sample, with only a marginal percentage of primary sector

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companies.

Table 1: Percentage of firms in the sample by economic activity ACTIVITY

FIRMS

AGRICULTURE, FORESTRY AND FISHING

1.33%

MINING AND QUARRYING

0.52%

MANUFACTURE OF COKE AND REFINED PETROLEUM PRODUCTS

0.02%

7.00%

TEXTILE

1.71%

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MANUFACTURE OF FOOD, BEVERAGE AND TOBACCO

0.80%

MANUFACTURE OF LEATHER AND FOOTWEAR

0.50%

MANUFACTURE OF WOOD AND CORK

0.86%

MANUFACTURE OF PAPER AND PAPERBOARD

0.96%

PRINTING AND REPRODUCTION

0.77%

CHEMISTRY

5.18%

PHARMACY

1.38%

MANUFACTURE OF RUBBER AND PLASTICS

3.33%

MANUFACTURE OF OTHER NON-METALLIC MINERAL

2.99%

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MANUFACTURE OF WEARING APPAREL

PRODUCTS METALLURGY

1.43%

METAL MANUFACTURING

5.33%

MANUFACTURE OF COMPUTER, ELECTRONIC AND

2.54%

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OPTICAL PRODUCTS MANUFACTURE OF ELECTRICAL EQUIPMENT MANUFACTURE

OF

OTHER

2.44%

MACHINERY

AND

6.30%

EQUIPMENT 2.40%

SHIPBUILDING

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MANUFACTURE OF MOTOR VEHICLES

0.23%

AERONAUTICS AND SPACE CONSTRUCTION

0.20%

MANUFACTURE OF OTHER TRANSPORT EQUIPMENT

1.55%

OTHER MANUFACTURING ACTIVITIES

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MANUFACTURE OF FURNITURE

REPAIR AND INSTALLATION OF MACHINERY AND

SEWERAGE,

WASTE

REMEDIATION ACTIVITIES CONSTRUCTION TRADE

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EQUIPMENT ENERGY AND WATER

0.30%

MANAGEMENT

AND

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TRANSPORTATION AND STORAGE

1.25% 0.75%

0.72% 0.85%

3.95% 8.43% 2.30%

ACCOMMODATION AND FOOD SERVICE ACTIVITIES

1.77%

TELECOMMUNICATIONS

0.50%

COMPUTER

PROGRAMMING,

CONSULTANCY

AND

5.72%

COMMUNICATION

2.25%

OTHER

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RELATED ACTIVITIES

INFORMATION

AND

ACTIVITIES

2.00%

REAL ESTATE ACTIVITIES

0.81%

R&D SERVICES

2.38%

OTHER ACTIVITIES

7.48%

ADMINISTRATIVE AND SUPPORT SERVICE ACTIVITIES

4.34%

EDUCATION

0.51%

HUMAN HEALTH AND SOCIAL SERVICES

2.24%

ARTS, ENTERTAINMENT AND RECREATION

0.49%

OTHER SERVICES

1.17%

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FINANCIAL AND INSURANCE ACTIVITIES

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CIS is the result of a large pre-test and pilot test in numerous firms across several countries, ensuring, therefore, the interpretability, reliability and validity of the data and

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its measures. In addition, the CIS sample is a stratified random sample of firms with ten or more employees. This random sampling ensures the representativeness of the sample,

allowing for the generalisation of the results to the population (Bryman and Bell, 2011; Saunders et al., 2009). Furthermore, the subsample used in this study is also representative according to the Spanish Statistical Institute, because it is formed by five

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representative strata, consisting of: companies with two hundred or more employees

with internal R&D; firms with two hundred or more employees without internal R&D;

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firms with less than two hundred employees with internal R&D; companies with fewer than two hundred employees with external R&D and without internal R&D; and firms with less than two hundred employees without innovation expenditures (incl. internal R&D and external R&D). Saunders et al. (2009) note that stratified random samples are more representative across strata than simple random samples, although it is relatively

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difficult to explain.

4.1. Variables and measures

The obstacles to innovation are: lack of funds, limited external funding sources; high

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innovation costs; lack of qualified staff; limited information on technology; lack of information on markets; difficulty in finding cooperation partners for innovation;

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market dominated by established firms; uncertain demand for innovative goods and services; lack of innovations demand; and lack of need for previous innovations (OECD and EUROSTAT, 2005; Souto, 2012). The measurement scale for these variables is dichotomous: 1 if the innovation obstacle is relevant to the firm and 0 if the innovation obstacle is not relevant to the firm.

The variable called ‘firms that pursue environmental innovations’ refers to firms involved in the generation of environmental innovations. The variable ‘environmental innovation’ is dichotomous, taking the value 1 if the firm has achieved environmental innovation and the value 0 if the firm has not achieved environmental innovation. 11

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The public funding variable takes the value 1 if the firm has obtained public funding and the value 0 if the firm has not obtained public funding. The variable ‘cooperation in innovation activities’ is dichotomous: 1 if the firm cooperates actively in their

activities.

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innovation activities and 0 if the firm does not cooperate actively in their innovation

The control variable is the size of the company. Firm size is measured by the number of

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employees (Cabrales et al., 2008; Kasch and Dowling, 2008).

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4.2. Data analysis

The empirical analysis is conducted in two sections, in order to analyse: (1) the differences in the obstacles to innovation between the firms involved in environmental innovation and the firms that are not; and (2) how companies involved in environmental innovations overcome the factors that hinder the achievement of such innovation.

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The statistical technique used in the first section is the Wilcoxon-Mann-Whitney test, while in the second section the binary logistic regression is used.

In the Wilcoxon-Mann-Whitney test, the variable called ‘firms that pursue

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environmental innovations’ identifies two independent groups, acting as an ‘independent variable’, while variables concerning innovation obstacles are dependent

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variables.

Wilcoxon-Mann-Whitney is a nonparametric test between two independent groups (Mann and Whitney, 1947; Wilcoxon, 1945). This statistical technique is appropriate when dependent variables are ordinal, because in that case it is considerably more efficient and robust than parametric alternatives (Higgins, 2004; King, 1986; Tufféry, 2011), such as t-tests (Conover, 1998; Higgins, 2004; King, 1986) or ANOVA (King, 1986; Tufféry, 2011).

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In binary logistic regression the dependent variable is obtaining environmental innovations, the explanatory variables are obtaining public funding and cooperation in innovation activities, and the control variable is firm size. The binary logistic regression is estimated in two steps: first without control variables in model 1, and second with

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control variables in model 2. The analysis was carried out on the companies involved in environmental innovations.

The empirical model of the second section was estimated using a binary logistic regression, as the dependent variable is dichotomous; this statistical technique assigns

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probabilities to each particular category. To ensure that binary logistic regression has

been estimated properly, it is necessary to evaluate the existence of multi-collinearity

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problems. The variance inflation factor (VIF) is calculated to detect multi-collinearity among explanatory variables. The VIF values higher than 10 show problems of multicollinearity, which adversely affect the regression estimates (Field, 2009; Jaccard et al., 1990).

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5. Results

Of the total sample, 64.5% of the companies achieved some innovation between 2009 and 2011, 2.9% of the firms did not and 32.6% of the companies did not know or had no answer. Almost all the companies (98.7%) recognised the existence of obstacles or

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difficulties to innovation in the period 2009-2011, while 1.3% of them had no difficulties. A little under half (42.5%) of the sample companies recognised the

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importance of environmental issues, while 23.2% of them said that the environment was not relevant; the remaining 34.3% of the companies did not know or had no answer.

Among both the companies that recognised the importance of the environment and those that did not: 95.4% of them achieved some innovation between 2009 and 2011; 98.9% of them recognised the existence of obstacles or difficulties to innovation during the period 2009-2011 and 1.1% of the companies had no relevant difficulties; 78.4% carried out some innovation activity in 2011; 79.7% of them received some public financial support; and 37.8% cooperated in their innovation activities.

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As Figure 1 shows, the percentage of companies that recognised the importance of the obstacles to innovation was clearly higher among firms that pursued environmental innovations than among firms that did not pursue them. The only exception was in the lack of need for previous innovations and the lack of innovations demand. The first,

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with practically the same percentages in both groups of firms, and smaller percentages than any other obstacles – a good indication of the lower recognition of this obstacle

compared to other obstacles. The second, with a higher percentage in firms not involved

in environmental innovations than in those involved in them. The factors recognised by most firms as a difficulty to innovation were related to the availability of funds and

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funding sources, high innovation costs, and uncertain demand. The relevance of the

difficulty in finding cooperation partners for innovation revealed the greatest difference

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in percentage terms, between those firms involved in environmental innovation and those which not.

Figure 1: Obstacles to innovation by percentage of companies that recognize their

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relevance

In general, figure 2 shows a degree of relevance of the obstacles to innovation which is always higher in firms involved in environmental innovations than in the firms not involved in environmental innovations, with the exception of the lack of need for 14

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previous innovations and lack of demand for innovations, in which the relationship is reversed between the two groups of firms for medium and high relevance levels. Moreover, this figure identifies the main obstacles to innovation, which coincide with the factors recognised by most firms as a difficulty. The main difficulties for innovation

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are: lack of funds and external funding sources, high cost of innovation, and uncertain demand.

Among the companies not involved in environmental innovations: 61.6% of these

companies undertook innovation activities in 2011, 63.7% obtained public funding, and

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24.8% cooperated in their innovation activities. On the other hand, of the companies involved in environmental innovations: 87.5% undertook innovation activities in 2011,

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88.6% received public funding, and 45% of the companies cooperated in their innovation activities.

Figure 2: Relevance of obstacles to innovation of firms involved in environmental

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innovations and firms not involved in environmental innovations

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5.1. Obstacles to innovation

The descriptive analysis shows the existence of differences in the obstacles to innovation between the firms involved in environmental innovations and the firms that

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are not. Specifically, this work focuses on the existence of differences in the relevance given to the consideration of obstacles to innovation. The Wilcoxon-Mann-Whitney test is used to determine whether these differences are significant.

The results show the existence of significant differences between the firms involved in

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environmental innovations and the firms not involved in environmental innovations,

regarding the recognition of the importance of the following obstacles to innovation:

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lack of funds (81% versus 92%, p < 0.001); lack of external funding sources (77% versus 89%, p < 0.001); high innovation costs (80% versus 89%, p < 0.001); lack of qualified staff (68% versus 84%, p < 0.001); lack of information on technology (68% versus 84%, p < 0.001); lack of information on markets (67% versus 84%, p < 0.001); difficulty in finding cooperation partners for innovation (58% versus 75%, p < 0.001); markets dominated by established firms (69% versus 85%, p < 0.001); uncertain demand for innovative goods and services (74% versus 89%, p < 0.001); and lack of

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innovations demand (49% versus 46%, p < 0.05). The lack of need for innovation due to previous innovations is a variable that does not differ significantly between the two groups of companies. This obstacle is the one recognised as least relevant; in the two

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groups of companies analysed the percentage does not reach 50%.

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Table 2: Wilcoxon-Mann-Whitney test

Group

Lack of

Firms that do not

Wilcoxon-MannWhitney test Mean

Sum of rank

Z

rank

Asymp. Sig. (twotailed)

3048.134

7062526

3402.185

14411655

-12.787

0.000

funds in the pursue environmental firm

innovations Firms that pursue

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environmental innovations Firms that do not

external

pursue environmental

funding

innovations

sources

Firms that pursue

3023.919

7006420

3415.430

14467761

3080.508

7137537

3384.477

14336644

environmental

High

Firms that do not

innovation

pursue environmental

costs

innovations

environmental innovations

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Firms that pursue

Lack of

Firms that do not

qualified

pursue environmental

staff

innovations

2949.041

6832928

-10.391

0.000

-14.544

0.000

3456.386

14641253

-15.548

0.000

2930.345 6789608.5 -15.288

0.000

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Firms that pursue

0.000

SC

innovations

-13.004

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Lack of

environmental innovations Lack of

Firms that do not

2926.415

6780504

3468.762

14693677

on technology

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information pursue environmental innovations

Firms that pursue

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environmental innovations

Lack of

Firms that do not

information pursue environmental on markets

innovations Firms that pursue

3466.613 14684572.5

environmental innovations

17

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Difficulty in Firms that do not finding

2914.740

6753452

3475.148

14720729

2936.010

6802736

3463.514

14671445

-14.308

0.000

pursue environmental

cooperation innovations partners for Firms that pursue environmental

Market

Firms that do not

dominated

pursue environmental

by

innovations

established

Firms that pursue

firms

environmental

Uncertain

Firms that do not

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innovations

-15.363

0.000

SC

innovations

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innovation

2961.633 6862104.5 -15.496

0.000

demand for pursue environmental innovative

innovations

goods and

Firms that pursue

services

environmental

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innovations

3449.499 14612076.5

Lack of need Firms that do not

3275.773 7589965.5

-0.045

0.964

-2.421

0.015

for previous pursue environmental innovations innovations

3277.671 13884215.5

EP

Firms that pursue environmental innovations

Firms that do not

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Lack of

3343.159 7746100.5

innovations pursue environmental demand

innovations

Firms that pursue

3240.812 13728080.5

environmental innovations

18

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5.2. Environmental innovation

The results so far highlight the existence of more companies with relevant factors hampering innovation among those that pursue environmental innovations, and in

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general, the highest levels of importance of the obstacles to innovation are found within these companies. In light of these results a question arises regarding how these companies manage to overcome the factors that hinder the achievement of

environmental innovations. This requires the identification of the specific aspects that enable environmental innovation, thus overcoming the problems associated with this

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type of innovation. Significantly, almost a quarter (24.9%) more firms involved in environmental innovations than those that are not, receive public financial support; the

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number of firms that cooperate in their innovation activities in the firms involved in environmental innovations is also almost double that found in the firms not involved in environmental innovations. Therefore, to determine whether the companies involved in this type of innovation are overcoming these obstacles through public financial support or cooperation, a binary logistic regression analysis is proposed.

In models 1 and 2, the Chi-square value of 1955 (model 1) and 2774 (model 2) are

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highly significant (p <0.001); this means that the null hypothesis of coefficients equal to zero is rejected. From the first model to the second model, the chi-square value increases, the -2 log likelihood is reduced from 3917 to 3098, and Nagelkerke R2 increases from 0.49 to 0.64, indicating a better fit in the second model. The introduction

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of a control variable reduces the coefficient of public funding and cooperation in

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innovation activities, but both variables are highly significant in the two models.

In the second model, the coefficient of public funding is 0.6 (p <0.001), the coefficient of cooperation in innovation activities is 1.75 (p <0.001), and the coefficient of firm size is 0.01 (p <0.001). The explanatory and predictive ability of the model is good, correctly classifying 93% of the observations, with an R2 of 0.64. Therefore, public

funding, cooperation in innovation activities, and firm size positively and significantly influence the achievement of environmental innovations.

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Table 3: Binary logistic regression

Dependent variable: Environmental innovation Model 1

Model 2

Coefficient

Coefficient

Public funding

0.82***

0.60***

Cooperation in innovation activities

2.34***

Firm size

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Independent variables:

1.75*** 0.01***

Model statistics 1955.43***

2774.18***

-2 Log likelihood

3916.91

3098.17

0.49

0.64

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Model chi-square 2

Correct classification % Observations

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R of Nagelkerke

93.2

93.2

4236

4236

* p < 0.05; ** p < 0.01; *** p < 0.001

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Finally, the variance inflation factor shows that multi-collinearity is not a problem. The variance inflation factor does not exceed 1.1 in any variable (see table A.1), which is

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considerably below the benchmark of 10 (Field, 2009; Jaccard et al., 1990).

6. Discussion

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Authors such as Cabrera and Soto (2010), Donkels and Pierre (1990), and Hamel (2006) highlight the relevance of our object of study –verifying the key role played by innovative and technology-based enterprises as engines of economic development in a country, especially in recessionary economic phases (Fagerberg, 2005; Potts, 2010; Tseng et al., 2012). Likewise, other authors highlight the important role played by this specific type of business, in driving global business competitiveness (Dossi, 1988; Geroski, 1995; Schneider and Veugelers, 2010).

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Moreover, the barriers to innovation analysed in this work are very similar to those described in several scientific studies on the subject, developed in other countries such as Belgium (Donkels and Pierre, 1990), Germany (Almus and Nerlinger, 1990,

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Schneider and Veugelers, 2010) and the United Kingdom (Ganotakis and Love, 2011).

In particular, our research shows that the main difficulties for innovation are: lack of

funds and external funding sources, high cost of innovation, and uncertain demand.

These difficulties are consistent with those identified in previous works such as those by Schneider and Veugelers (2010) and Souto (2012). Even the seminal work of

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hurdle to be overcome by innovative companies.

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Schumpeter (1939) emphasised the importance of the problem of uncertainty as a major

Financial needs, high innovation costs, lack of qualified staff, lack of information, and uncertainty are also recognised in the literature on innovation as the major constraints to the generation of innovations (Blanchard et al., 2012; D’Este et al., 2012; Souto, 2012).

However, although works such as Boons and Lüdeke-Freund (2013), Klewitz and Hansen (2014) and Verganti and Noci (1999) highlight the importance of environmental

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innovation management, and other authors such as Chiou et al. (2011) and Eiadat et al. (2008) indicate the relevance of environmental innovation for achieving competitive advantages, the specific difficulties and problems in the achievement of this innovation are not addressed in a comprehensive and systematic way in the existing literature

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(Boons et al., 2013; Keskin et al., 2013), despite their importance in achieving these

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innovations, as can be clearly seen from the results of this study.

In addition, this paper highlights the need to study and treat separately the problems of environmental innovations, given the differences that exist in the intensity of the obstacles to innovation between environmental innovations and other nonenvironmental innovations. In this regard, many authors have focused on drivers and incentives for green innovation (Cuerva et al., 2014; Hallstedt et al., 2013; Klewitz and Hansen, 2014), forgetting those factors that may inhibit or impede eco-innovation. Corporate social responsibility is detailed as an important incentive for eco-innovation (Bansal and Roth, 2000; Cuerva et al., 2014; Van Bommel, 2011). However, the findings of Cuerva et al. (2014) note that the CSR is statistically significant for non21

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green innovation but not for green innovation. This highlights that many drivers and incentives for environmental innovation remain as mere intentions or attempts, blocked by barriers to environmental innovation. The obstacles to environmental innovation are still an emerging issue with many challenges and are of great importance for improving

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environmental innovation processes and achieving sustainability. In contrast, barriers to conventional innovation have been extensively addressed in the literature.

Public funding, cooperation in innovation activities, and firm size positively and significantly influence the achievement of environmental innovations. This evidence is

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in line with the general literature on innovation. The reason for this is that cooperation allows for the sharing of funding requirements, uncertainty and cost of innovation with

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partners (Becker and Dietz, 2004; Blanchard et al., 2012; Souto, 2012), while, public funding has a positive direct effect by reducing the financial obstacles to innovation (Falk, 2007; Souto, 2012). In fact, the importance of these obstacles in environmental innovation highlights the critical role of collaboration and public funds in sustaining and improving the capacity and performance of the environmental innovation process.

Schneider and Veugelers (2010) suggest the existence of differences between SMEs and

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large firms, in terms of generating innovation, cooperation and the acquisition of public funds. Regarding the generation of environmental innovations, Becker and Dietz (2004) and Seuring and Müller (2008) indicate the existence of costs in the search for external partners, as well as in maintaining cooperation agreements, due to the efforts of

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coordination and the lack of information available in SMEs.

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Finally, policies oriented toward alleviating financial problems should be supplemented along with others oriented towards overcoming non-financial obstacles to innovation (Blanchard et al., 2012; OECD and EUROSTAT, 2005); such as the lack of qualified personnel (Palop and Vicente, 1999; Shank, 2007) and the difficulty in finding partners for cooperation in innovation activities (Donkels and Pierre, 1990; Uljin et al., 2007).

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7. Conclusions

The lack of studies systematically and comprehensively addressing barriers to environmental innovation is a major challenge and an obstacle for environmental

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improvement. In this sense, this study analyses specific problems and particular characteristics of environmental innovation, providing a useful approach for achieving this kind of innovation.

Environmental and non-environmental innovation should be treated separately, in order

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to deal with the problems (triggered by its peculiarities) of the former. Companies,

political creators and other agents of national innovation systems or sectorial innovation

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systems should develop specific programmes and actions in the field of environmental innovation; that is to say, national innovation systems and sectorial innovation systems must be adapted to accommodate the overcoming of the problems associated with environmental innovations. To this end, it is important to consider the issues and recommendations outlined below.

The lack of funds, limited access to external funding sources, high innovation costs,

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lack of qualified staff, limited information on technology, lack of information on markets, difficulty in finding cooperation partners for innovation, markets dominated by established firms, and uncertain demand for innovative goods and services are bigger problems for companies involved in environmental innovations than for those not

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involved. In other words, the factors hindering innovation are accentuated in companies involved in environmental innovations. The largest differences between environmental

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and non-environmental innovations correspond to the lack of qualified staff, limited information on technology, lack of information on markets, difficulty in finding cooperation partners for innovation, markets dominated by established firms, and uncertain demand for innovative goods and services.

The lack of qualified staff demands more specific training on environmental issues in education centres. Research centres should also increase efforts in environmental research, enabling an increase in the number of highly qualified researchers in the area of environmental improvement, as these researchers are the qualified personnel required for environmental innovation. In turn, companies should be aware that both hiring and 23

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collaboration might be good ways to access these individuals. Furthermore, universities, as centres of education and research, should play a central role in meeting the demands for personnel qualified in environmental innovation. Environmental research cannot be neglected in universities and research centres (nor by policy makers), nor can we ignore

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the fact that the creation of cohesive interdisciplinary research groups is as important as major research efforts.

Uncertainty is one of the obstacles to environmental innovation most mentioned by the

companies involved in such innovations, much like the lack of funds, lack of external

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funding sources, and the high cost of innovation. Uncertainty is a more pressing

problem in environmental innovation, and it is influenced by the increased difficulty in

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accessing information about technologies and markets. Thus, the presence of individuals able to cope and manage this uncertainty will be vital in firms, particularly, as uncertainty is more relevant in environmental innovations. In addition, uncertainty requires the design of an innovation process specifically aimed at environmental innovation, supported by tools adapted to the particularities of this kind of innovation, such as environmental technological monitoring, environmental technological watch, and environmental technological foresight. These tools reduce the problems arising

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from the lack of information on technologies or markets. As for policy makers, they should create specific support measures, such as: orientation and information services; services focused on supporting environmental innovation; clarity of environmental regulation; the elimination or simplification of the complex and tangled environmental

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regulation, which results in a diffuse and contradictory legal framework; a reduction in the number of organisms that regulate the same environmental issues, as well as in the

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number of different regulations for one environmental aspect; a minimum period of application for environmental legislation; etc. Regarding the lack of external funding sources, it is reasonable to assume that uncertainty and lack of information on environmental innovation result in greater difficulty in accessing these sources; this indicates that innovation systems suffer from an absence or deficiency of external funding sources adapted to the peculiarities of environmental innovation.

Therefore, environmental innovation has to be considered separately, applying specialised support programmes and innovation processes adapted to the relevance and intensity of the obstacles to this type of innovation. 24

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Companies that pursue environmental innovations are less likely to suffer from a lack of innovations demand. In the environmental field there are many important advances that can be made to bring about a reduction in the environmental impact of business

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activities and a more effective and efficient use of natural resources. The achievement of sustainable economic models involves confronting multiple challenges, which continue to increase in urgency and relevance as a result of increases in the scale and impact of mankind’s activities on the natural environment.

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Both cooperation in innovation activities and public funding have a significant effect on the achievement of environmental innovations, as they help to overcome many of the

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barriers. Policy makers should be aware of both the importance of environmental innovations and the need to support the firms involved in these innovations. However, public support should not be limited to the financial side, but should also be directed at overcoming other obstacles. The importance of cooperation in innovation activities in the achievement of environmental innovations highlights the need for the existence of cooperation

between public environmental research

centres and

businesses.

Nonetheless, despite the usefulness and importance of public financial support and

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cooperation, these pathways are insufficient, by themselves, in achieving environmental innovation, and a good example of this is the difficulty in finding cooperation partners for this type of innovation. In fact, this is the obstacle to innovation that shows the largest difference between the companies involved in environmental innovations and

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those which not. Therefore, the establishment of specific support packages for environmental innovation, covering both financial barriers and barriers related to

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knowledge, is a requirement, as currently, non-existent or poorly articulated policies and plans are the norm.

Innovation systems must be equipped with all the necessary components to embrace the particularities of environmental innovation enabling companies to overcome environmental innovation obstacles; the recommended action would be to focus on providing the innovation system with the following: external funding sources that allow companies to raise funds to be employed in environmental innovation activities; agents focused on the generation of environmental knowledge; agents focused on basic environmental research; entities to support and advise on the process of acquisition of 25

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environmental knowledge and its integration into the knowledge base of firms; organizations that provide the necessary information (about technologies and markets) for environmental innovation processes; and other agents focused on environmental issues. Thus, the establishment of an environmental innovation system integrated into

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the national innovation system, just as sectorial innovation systems are, would be appropriate, but with the peculiarity of transversely crossing sectorial innovation systems.

Finally, future research could address: the importance of cooperation with public and

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private research centres, universities, etc. for environmental innovation; environmental

knowledge management; business models and the obstacles to environmental

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innovation; the role of internal aspects (such as culture, processes and organizational methods) in maintaining and improving the environmental innovation process; the impact of each obstacle to innovation on different types of environmental innovations or in different phases of the innovation process; or the fit of environmental innovation strategy with the innovation strategy of the firm.

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Appendix

Table A.1: Variance inflation factor of independent variables of binary logistic

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regression

VIF 1.03577912

Cooperation in innovation activities

1.03846306

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Public funding

Firm size

1.005241939

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