The impact of green economy practices on firm innovation using data from the World Bank Enterprise Surveys

This study explores how adopting green economy practices (GEP) shapes firm innovation. A comprehensive GEP adoption index is developed to evaluate whether greater engagement in green practices enhances a firm’s product and process innovation. The analysis covers ten types of GEPs, including improvements in heating and cooling, on-site clean energy generation, machinery upgrades, energy management systems, waste and recycling measures, air pollution controls, water management initiatives, fleet upgrades, lighting improvements, and other pollution control activities. Furthermore, the study investigates how different dimensions of GEPs relate to innovation outcomes. Using a firm-level dataset comprising 18,860 observations from the World Bank Enterprise Surveys (WBES), the logistic regression results indicate that firms with higher levels of GEP adoption are significantly more likely to innovate in both products and processes. These findings provide robust empirical evidence that environmental responsibility and innovation are complementary rather than competing objectives. The study offers important implications for managers seeking to integrate sustainability into innovation strategies and for policymakers promoting green and inclusive economic growth.