When less is more: The puzzling impact of employee education on green innovation performance

Environmental sustainability increasingly requires that firms adopt green innovation (GI) to balance their strategy for ecological protection with financial performance. However, the role of employee education in shaping this relationship remains ambivalent. Drawing on the World Bank Enterprise Survey, which covers 8941 firms across 42 countries, we employ a two-stage least squares approach to estimate these effects. Results show that GI improves overall financial performance, though the effect is insignificant in knowledge-intensive business services and among Asian firms. Strikingly, we uncover a “less is more” dynamic that challenges proportionality assumptions in human capital theory: GI's financial performance benefits are strongest at low levels of formal employee education and decline to negligible effects as education increases. This pattern is most pronounced in low-tech manufacturing, among European firms, and in large organizations. Extending absorptive capacity theory to sustainability, this suggests that practical, adaptive skills outweigh theoretical knowledge in translating GI into performance gains. We recommend that firms balance formal education with experiential learning and hands-on implementation skills to enhance GI performance.