Determinants of eco-innovation initiatives toward sustainability in manufacturing SMEs: Evidence from Bangladesh

Abstract

This study identifies the key factors accelerating the eco-innovation initiatives of manufacturing Small & Medium Enterprises (SMEs) in Bangladesh. The study further attempted to measure the impact of eco-innovation on a firm's economic, environmental, and societal performance, broadly called sustainability. Following the convenience sampling technique, data was collected from 876 respondents through a structured questionnaire considering the 7-point Likert scale. The Structural Equation Model (PLS-SEM) has been employed using Smart PLS v3.3 software to simultaneously show the constructs' relationships. Moreover, the study incorporated several tests to check the reliability and validity of the data. Furthermore, the degree to which data collected for this study fits well with the model has been tested by calculating model fit indices- NFI and SRMR. The findings reveal that all other factors Technological Capabilities (TC), Environmental Regulations (ER), Green products (GP), Competitive Pressure (CP), and Energy Price (EP) has a significant positive association with the firm's Eco-innovation initiatives except FR. Moreover, Eco-innovation (EI) greatly enhances the two domains of Sustainability- Environmental Performance (EnP) and Societal Performance (SoP) in manufacturing SMEs in Bangladesh. However, the relationship between EI and EcP was found to be insignificant. Apart from Economic Performance (EcP) andEnvironmental Performance(EnP), Societal Performance (SoP) as a sustainability domain remains unattended in the prior study, which has been incorporated in this research. Thus, the findings of this study will provide some unique implications for business managers and policymakers.