When Knowledge Is Power: Leveraging Green Innovation Through Employee Training

ABSTRACT This paper aims to examine the relationship between investments in employee training and green innovation outcomes in German firms. The study investigates how these training expenditures influence the development and implementation of innovations that lead to environmental benefits, such as reduced energy consumption or emissions. Data from the Mannheim Innovation Panel 2021 is utilized to test the relationship. The study employs both ordinary least squares regression, which provides an estimate of the average effect of the independent variable, and quantile regression, which offers a nuanced understanding by exploring effects across different levels of green innovation within the distribution. This approach allows for detailed insights into how training investments influence firms at various points along the distribution of green innovation outcomes. The findings show that training expenditures are consistently and positively correlated with green innovation, particularly for firms situated in the midrange of the green innovation distribution (quantiles 0.4–0.7). This suggests that investments in workforce training are especially beneficial for firms that are engaged in, or beginning to expand, their green innovation activities. Such training can help embed environmental competences into broader organizational practices. Research and development efforts also display a consistently positive and significant association with green innovation across the distribution, underscoring their critical role in driving innovation. Public funding is beneficial at midquantiles (0.4–0.5) of green innovation, where it appears to support the development of a crucial knowledge base, but the influence diminishes for firms at higher quantiles of the green innovation distribution. Smaller firms (those with less than 250 employees) face more challenges in achieving high quantiles of the green innovation distribution, likely due to resource constraints and a narrower knowledge base compared with larger firms. In addition, firms with higher climate change awareness are more likely to adopt green innovations, particularly at higher quantiles (0.7–0.9) of the distribution. Finally, industry affiliation gains importance at higher green innovation quantiles, pointing to sectoral dynamics at advanced innovation stages. The findings emphasize the importance of German firms investing in structured employee training programs to drive green innovation. For practice, this indicates that training aligned with environmental objectives can provide a tangible level for advancing green innovation in firms. This study contributes to the existing research by uncovering how investments in employee training influence green innovation at different levels of the distribution. By employing quantile regression, the analysis highlights heterogeneous effects that remain hidden on average‐based approaches, offering new insight into when and for which firms training investments matter most. Situated in the German context of institutionalized vocational training, the findings enrich international debates on the role of workforce development in advancing green innovation.