Linking green process innovation to environmental sustainability through green product innovation

The study examined the effects of green process innovation (GPcI) and green product innovation (GPI) on environmental sustainability performance (ESP) within Ethiopian manufacturing firms, a context that remains underexplored. Additionally, the manufacturing sector’s active industrialization phase, evolving environmental regulations, persistent sustainability gaps, and growing pressure to adopt green innovations motivated the researchers to focus on Ethiopian manufacturing firms. The study employed the Dynamic Capabilities Theory (DCT) and Natural Resource-Based View (NRBV) to evaluate a mediation model, drawing on survey data from 350 firms analysed using PLS-SEM. The results show that both GPcI and GPI have a positive influence on ESP. Additionally, GPI partially mediates the GPcI-ESP relationship, accounting for 40.6% of the total effect. This mediation result suggests that process innovations enhance sustainability outcomes primarily through subsequent product-level innovation. The study adds value to the body of literature by addressing a developing-country context marked by resource limitations and distinct institutional pressures. The results offer useful recommendations for policymakers and managers seeking to improve environmental performance through targeted green innovation strategies in emerging markets.