The process supporting the emergence of the environmental innovation capabilities within small businesses: An empirical investigation

Abstract For several years, companies have made strategic changes to align with sustainable development principles by developing eco‐innovations. While research consistently highlights the positive impact of eco‐innovations on organisational performance, the factors driving these initiatives—particularly within small and medium‐sized enterprises (SMEs)—remain less clear. This inconsistency is due to the heterogeneity of SMEs and their high sensitivity to external contexts. To address this issue, our study delves into the role of competencies, technological factors and networking in shaping the environmental innovation capabilities of a homogeneous SME population in terms of sector, age, size, legal status, geographical location and orientation towards innovation. Using the partial least squares approach, we find that competencies and technological factors are the key drivers of eco‐innovation, while networking shows no significant effect. These findings contribute to the existing literature by underlining the fundamental importance of internal skills and technological adoption for fostering eco‐innovation. They also suggest that networking becomes essential in environments lacking robust public and private support mechanisms for SME growth. Considering the rapid and turbulent changes, driven by the dual needs of sustainability and competitiveness, our results offer useful and critical advice for policymakers to define more appropriate and effective policies.