Journal of Cleaner Production 233 (2019) 993e1003

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Journal of Cleaner Production

journal homepage: www.elsevier.com/locate/jclepro

Take your time: Examining when green innovation affects financial

performance in multinationals
Lígia de Azevedo Rezende a, *, Ana Claudia Bansi b, Marlon Fernandes Rodrigues Alves a, b,
Simone Vasconcelos Ribeiro Galina a
a
School of Economics, Business Administration and Accounting at Ribeira ~o Preto, University of Sa
~o Paulo, Avenida Bandeirantes, 3900 - Vila Monte Alegre,
~o Preto, SP, 14040-905, Brazil
Ribeira
b ~o Paulo, Rodovia Washington Luís, Km 235, S/N, Monjolinho, Sa
Federal Institute of Education, Science and Technology of Sa ~o Carlos, SP, 13565-905, Brazil

a r t i c l e i n f o a b s t r a c t

Article history: Although green innovation is seen by companies as a way to meet regulatory pressures and customers'
Received 30 January 2019 needs, there is still no consensus about its impact on performance. This paper examines the role of green
Received in revised form innovation intensity on financial performance based on data from 356 multinationals firms using a fixed
17 May 2019
effect panel regression. We found three main results. First, there is no significant association of green
Accepted 13 June 2019
Available online 13 June 2019
innovation's intensity with firm financial performance in the immediate year. Second, the association is
positive, lasts during the subsequent years and becomes expressively higher after 2 years. Third, the
degree of internationalization does not moderate this relationship. These findings provide empirical
Keywords:
Green innovation
evidence that the return of green innovations is conditional to time but not to how much a multinational
Financial performance firm is internationalized.
Internationalization © 2019 Elsevier Ltd. All rights reserved.
Green patent
Multinationals
Sustainability

1. Introduction
In recent years, green innovation has become an important
catalyst for sustainable development, as it is seen by companies as a
way of not only meeting regulatory pressures and consumer de-
mands but of increasing efficiency through better use of natural
resources. Regardless of its benefit to the environment, the impact
of green innovation on corporate financial performance remains
uncertain. Green innovation and performance have been both
positively and negatively related, and “there seems to be no
consensus in the relevant literature” (Przychodzen and
Przychodzen, 2015, p. 255).
From a positive view, green innovation is capable of affecting
performance through two distinct mechanisms: market differen-
tiation and cost reduction (Caracuel and Ortiz-de-Mandojana,
2013). In the first case, the company can benefit from the practice
of premium prices and reach consumers’ segments that are more
sensitive to environmental issues. The reduction of costs is due to
* Corresponding author.
E-mail addresses: ligia.azrezende@gmail.com (L.A. Rezende), ana_bansi@ifsp.
edu.br (A.C. Bansi), mfralves@fearp.usp.br (M.F.R. Alves), svgalina@usp.br
(S.V.R. Galina).
the more efficient use of resources through recycling and waste
reduction (Caracuel and Ortiz-de-Mandojana, 2013).
On the other hand, studies have shown that green companies do
not experience better performance than environmentally neutral
firms and that green strategies do not contribute to increasing the
valuation of the firm (e.g., Fernando et al., 2009). Additionally, an
investment with a long-term return is one of the barriers to green
innovation (Angelo et al., 2012), similar to what it is observed in
technological innovation in general, which consists of usually long
and high-risk processes (Cozijnsen et al., 2000). This is because of
multiple stages for innovation (green included) from the beginning
to the insertion of novelty into the market, which takes time lags
between its stages and from them to firm performance. Thus, time
is an important variable to better understand the impacts of
innovation on performance.
The differences in empirical studies’ findings indicates that the
research must be carried out while considering specific aspects of
the phenomenon to advance in the comprehension of its totality. As
mentioned, the time needed for an innovation cycle is one of these
issues that has already been addressed in the (general) innovation
literature but has been scarcely examined when concerning green
innovation. Also, more efficient assessments of the real impact of
green innovation on corporate performance could be obtained

https://doi.org/10.1016/j.jclepro.2019.06.135
0959-6526/© 2019 Elsevier Ltd. All rights reserved.
994 L.A. Rezende et al. / Journal of Cleaner Production 233 (2019) 993e1003
when different types of moderating variables are considered
(Przychodzen and Przychodzen, 2015), but the literature still lacks
research on the subject.
One firm-specific factor that may allow companies to rapidly
improve performance through innovation is internationalization
(Kafouros et al., 2008), considering that the capacity for renewal
reflects the ability of firms to learn in foreign markets (Riviere and
Suder, 2016). It is worth considering that internationalization ap-
pears to be a relevant option to achieve firm growth (Hagen et al.,
2014) and performance (Contractor et al., 2007). However, inter-
nationalization and green innovation are barely related (Chiarvesio
et al., 2015), notwithstanding companies with international expe-
rience are more likely to adopt proactive environmental programs
and strategies (Aguilera-Caracuel et al., 2012), which may also
suggest a greater predisposition of these companies to green
innovation.
Thus, this study seeks a better understanding of the relationship
between green innovation intensity and financial performance over
time by considering the moderating effect exerted by the degree of
internationalization of multinational companies. The research
questions follow: Does green innovation intensity relate to the
financial performance of multinational companies? If so, what is
the time lag for a better financial performance? Does the degree of
internationalization influence this relationship? Therefore this
paper's contribution is a deeper comprehension of the influence of
green innovation on the performance of multinationals through
two relevant factors in the innovation literature: time for return
and degree of internationalization.
2. Literature review and hypothesis development
2.1. Green innovation
With a multiplicity of terminologies (e.g., eco-innovation, sus-
tainable innovation, environmental innovation, and others),
conceptualizing green innovation is not an easy task (Angelo et al.,
2012). Varadarajan (2015) examined the definitions offered by the
literature and identified that most of them have limitations. Despite
the inconsistencies, the definitions of green innovation seem to
carry the common idea of improvements for promoting impact
reduction (Angelo et al., 2012) through enhancing resource effi-
ciency, saving raw materials, and decreasing pollution (Cai and Li,
2018). Green innovation can be defined as “organizational imple-
mentations and changes focusing on the environment, with im-
plications for companies’ products, manufacturing processes, and
marketing, with different degrees of novelty” (Angelo et al., 2012, p.
119).
Innovation (green included) is a multiple-stage process
(Gopalakrishnan and Damanpour, 1997) that includes R&D, in-
vention and its patenting, and innovative activities (manufacturing
or market launch). One of the possible and main outputs of the
green innovation process is green patents. To generate outputs such
as patents, inputs such as human resources and R&D investments
are necessary. For example, Samad and Manzoor (2015) found that
the patenting of green technologies increases 1.31% when there is a
1% increase in R&D investments, which shows that there is a pos-
itive relationship between the two variables.
However, despite the considerable investment required to
develop green technologies, the number of patents related to
renewable energy technologies has significantly increased over the
last decade (Bettencourt et al., 2013). Aside from that, the growth in
green patent applications is faster than the growth in overall patent
applications in more than 20 countries (OECD, 2017). This fact
gained the attention of national governments, and in 2009, coun-
tries such as Japan, Israel, South Korea, the United Kingdom, the
United States, and Australia initiated programs to accelerate the
granting of green patents (Dechezlepre ^tre, 2013; Lane, 2012).
Similar programs were also implemented in 2011 in Canada and in
2012 in Brazil and China. According to Dechezlepre^tre (2013) and
Lane (2012), these programs can significantly reduce the time
needed to obtain a green patent from years to months.
2.2. The relationship between green innovation and performance
Innovation has widely been pointed to as a determining aspect
of competitiveness and financial returns (Ernst, 2001; Kline and
Rosenberg, 2009). Although higher performance through innova-
tion is expected, as is generally observed (Artz et al., 2010),
empirical studies do not always confirm its positive relationship
(Bowen et al., 2010; Rosenbusch et al., 2011), as innovation's suc-
cess or failure is influenced by many factors, such as innovation
management style, timing of market introduction (van der Panne
et al., 2003), and internationalization (Kafouros et al., 2008).
Similarly, the influence of environmental practices (as green
innovation) on competitiveness has also been explored, but the
results are inconclusive, as shown by some studies via a negative
association between them; others, however, found a positive rela-
tionship. Cordeiro and Sarkis (1997), for example, found a signifi-
cant and negative association between environmental proactivism
and firm performance, and Fernando et al. (2009) showed that
green companies do not experience better performance than
environmentally neutral firms and that green strategies do not
contribute to increasing the market valuation of the firm.
However, many arguments and studies support the idea that
green innovation benefits performance. The literature shows that
innovations that come from adequate environmental standards can
lower product costs or increase value, as they allow companies to
use their inputs more productively (Linde and Porter, 1995). Green
innovation leads to cost reduction by recycling and reducing waste
while giving market differentiation to products, allowing com-
panies to reach environmentally sensitive consumers and, conse-
quently, benefit from the practice of premium pricing (Caracuel and
Ortiz-de-Mandojana, 2013). Thus, companies that produce more
green innovation can experience improvements in their financial
performance, as they reach both cost leadership and market dif-
ferentiation (Caracuel and Ortiz-de-Mandojana, 2013).
These factors end up affecting companies' financial indicators.
Organizations that introduce at least one type of green innovation
presented higher return on equity (ROE) and return on assets
(ROA), and higher profit retention compared to other organizations
(Przychodzen and Przychodzen, 2015). Improvements on com-
panies' financial indicators were observed for both process and
product innovation (Severo et al., 2017; Xie et al., 2016). Likewise,
green product development positively influences companies'
Tobin's Q and ROE, indicating that initiatives aimed at creating
more sustainable products are important for companies' profit-
ability and value (Miroshnychenko et al., 2017).
However, the divergence on methods and results shows that
there are still gaps for understanding issues related to innovation
processes' timing (Gerken et al., 2015; Loof and Heshmati, 2006),
which would be particularly relevant for a type of innovation that is
still less understood, such as green innovation. Regarding the
innovation process, the existence of a time lag between the proc-
ess's multiple stages and from them to firm performance have been
widely considered in innovation studies (e.g., Artz et al., 2010;
Ernst, 2001). Aside from that, according to Horva thova  (2010), an
appropriate time coverage is needed to establish a positive link
between environmental performance and financial performance.
Thus, although many empirical studies have demonstrated that
green innovation positively leads to increased performance, it is
 L.A. Rezende et al. / Journal of Cleaner Production 233 (2019) 993e1003
still uncertain the time required for it brings financial returns to
firms. However, similar to the general innovation process, it is ex-
pected that longer time lags will be needed. Thus, in light of the
literature evidence discussed above, the first hypothesis of this
study is as follows:
Hypothesis 1. Green innovation intensity positively influences
the financial performance of multinational enterprises (MNEs) in
the longer-term.
2.3. Internationalization
Some studies have shown that internationalization increases
the propensity for green product and process innovation
(Chiarvesio et al., 2015). For example, according to Peng et al.
(2009), companies with a higher degree of internationalization
are more likely to adopt a voluntary environmental program.
Similarly, Aguilera-Caracuel et al. (2012) found that the interna-
tional experience positively influences the adoption of proactive
environmental strategies. This may be a company's way of over-
coming the “liability of foreignness” demanded by the different
environments in which they are hosted (Zaheer, 1995). Therefore,
we can think of two arguments that explain why internationali-
zation can moderate the relationship between green innovation
and performance.
The first one is about the particularities of each country. With
globalization, companies ended up having easy access to interna-
tional markets, which resulted in them facing challenges related to
different environmental laws. Sources of knowledge about green
innovation are dispersed in other countries, and only a multina-
tional company can access this knowledge. This rapid assimilation
of knowledge can improve these companies’ financial performance.
Green innovation can create products and processes that are less
aggressive in regard to the environment and that bring interna-
tional business opportunities to companies from countries that are
more receptive to these types of innovation (Menezes et al., 2013).
Companies can access this source of dispersed knowledge by
exporting or directly investing abroad. Exporting companies oper-
ating in regions that have an institutionaleenvironmental profile
different from that in their home market may be more likely to
adopt a proactive environmental strategy at a global level, resulting
in acquiring an important environmental knowledge that can be
assimilated and integrated internal structures of the company
(Aguilera-Caracuel et al., 2012).
The second way is through owning assets abroad. When a
company is part of an international group, it represents an oppor-
tunity to learn about best practices from other countries and about
new possibilities for green innovation. Considering the knowledge
chain, benefits also come from being open to the development of
innovations through cooperation with national and international
research partners (Chiarvesio et al., 2015). Thus, multinational
companies investing in green innovation can improve their
competitive advantage globally. Again, it is important when a
company is in a foreign country where competition is bigger and
more complex. The improvement in competitive advantage could
be operationalized from reduced operating costs and an improved
reputation, improved legitimacy, and transparency (Aguilera-
Caracuel et al., 2012). Companies that introduce green in-
novations are significantly more profitable, retain more income to
grow, face less exposure to financial risk, have more resources, and
are generally larger (Przychodzen and Przychodzen, 2015). They
can still increase their total revenue because they can differentiate
themselves from their competitors and gain reputation and legiti-
macy (Caracuel and Ortiz-de-Mandojana, 2013).
In light of the evidence presented by the literature, we can see
995
that internationalization degree has the potential to moderate the
relationship between green innovation and the performance of
multinationals through two different perspectives: first, because
the particularities of each country in which multinationals are
likely to have different environmental demands and, second,
because being present in multiple countries means that the com-
pany has access to each country's particular environmental
knowledge. Therefore, it is assumed that the more international-
ized a company, the more multinationals will need to invest in
green innovation to meet particular country's demands and to take
advantage of dispersed knowledge that exists in the world without
forgetting financial return. This leads us to our second hypothesis:
Hypothesis 2. The degree of internationalization positively
moderates the relationship between green innovation intensity and
the financial performance of MNEs.
3. Method
3.1. Data collection and sample
We obtained the sample in two phases. First, we extracted the
5,000 largest publicly traded companies from the Thomson Eikon
database. From this, we extracted the data on financial perfor-
mance, internationalization, and R&D required to complete the
research model for all 5,000 companies, considering a period of 10
years, from 2006 to 2015. Companies that did not have all the
necessary information were removed from the sample, leaving a
total of 378 companies. Of these, we excluded 22 other companies
due to inconsistencies in the information related to the degree of
internationalization (as percentages of sales and assets abroad of
more than 100%) and Tobin's q. The final sample, therefore, was
composed of 356 MNEs.
In the second phase, we collected all the patents deposited by
the 356 MNEs during the studied period using the Thomson
Innovation database. After that, we identified which patents could
be considered green patents using the International Patent Classi-
fication (IPC) codes. The IPC classifies patents and utility models
according to the different technological areas they belong to (WIPO,
2017). Through the IPC Green Inventory, the identification of pat-
ents related to environmental/sustainable technologies is facili-
tated by using specific codes (WIPO, 2017). Finally, we counted the
annual quantity of total patents and green patents for each of the
companies. At this stage, all 356 previously selected companies
were kept in the sample, regardless of the number of patents
deposited. Thus, even companies that did not deposit any patents
and/or green patents during the study period were kept in the
sample to reduce selection bias.
3.2. Measures
The main variables used in this paper are green innovation in-
tensity, financial performance, and degree of internationalization,
the measures of which are detailed as follows.
Green innovation intensity. We measured the independent
variable using the proportion of green patents in relation to total
patents (Caracuel and Ortiz-de-Mandojana, 2013) deposited be-
tween 2006 and 2015 by the selected MNEs. According to Lindman
and So€derholm (2016), the advantages of using patents as a mea-
sure of innovation are that they are easily accessible and can be
subdivided into distinct technological areas. In addition, over the
years, researchers have considered patents to be one of the most
important indicators of innovation because they measure the re-
sults of technological development (Lindman and So €derholm,
2016).
996 L.A. Rezende et al. / Journal of Cleaner Production 233 (2019) 993e1003
Financial performance. We measured the dependent variable
using the ROA, which is used in green innovation versus perfor-
mance literature (Caracuel and Ortiz-de-Mandojana, 2013; Przy-
chodzen and Przychodzen, 2015; Xie et al., 2016). In studies
involving MNEs, which this paper explores, some authors have
already identified that financial metrics are the most used (Ruigrok
and Wagner, 2004), and the main one is ROA (Bansi, 2017).
Degree of internationalization. We considered the degree of
internationalization as a moderating variable, measured as foreign
assets in relation to company's total assets (FATA). FATA represents
a structural measure that shows the companies' production abroad
through the purchase of assets or assembly of factories (Ruigrok
and Wagner, 2004). According to Nguyen (2016), this measure is
one the most used by the literature about the field.
Controls. We used R&D intensity, company size, and Tobin's q as
control variables. The R&D intensity was measured by the ratio
between R&D investment and net sales (Herna ndez et al., 2014).
Several studies showed that R&D investments influence the com-
pany's performance (Lee and Min, 2015; Rafiq et al., 2016); more-
over, in this work, it is important to control this variable, as it is
necessary to invest in R&D to generate patents. Firm size was
measured by the number of employees. According to Orlitzky
(2001), firm size may be positively related to financial perfor-
mance by leading to economies of scale, better control over re-
sources, and the retention of better employees. In addition, the use
of firm size as a control variable has been widely applied by the
literature about this field (King and Lenox, 2001; Li et al., 2017;
Miroshnychenko et al., 2017). Finally, Tobin's q is a measure of
market performance. It represents the relationship between the
company's market value and the replacement value of its assets (Lu
and Beamish, 2004). Currently, it is an important and widely
accepted company performance measure (Yuan et al., 2016) and is
important for this paper because environmental actions can change
the companies' market value. We also collected data regarding the
sector and country of origin; however, we could not add these
variables in the fixed-effects model because they are time invariant.
3.3. Data analysis
The method of analysis used in this study was a fixed effect
regression with balanced panel data. In the fixed-effects model,
each unit of analysis (in this case, companies) has its own intercept,
which, despite being different for each individual (company), is
invariant in time (Gujarati et al., 2011). This model controls the
variables that do not change over time, collaborating to reduce the
bias of the omitted variable (Dranove, 2012). In addition, according
to Allison (2009), in fixed effects models, the unobserved variables
are able to have associations with the observed variables. We es-
timate the following regression:
ROAit ¼ ai þ at þ b  green innovation intenstiyit þ g0 Xit þ εit
The regression is estimated by Ordinary Least Squares (OLS). To
Table 1
Descriptive statistics and correlation matrix.
Variable Mean Standard deviation
1 Financial performance (ROA) 6.594 6.881
2 Green innovation intensity 3.706 7.377
3 FATA 24.959 22.495
4 R&D Intensity 4.886 6.161
5 Employees 35904.070 58414.620
6 Tobin's Q 2.683 3.016
Note. *. p < 0.05. Sector and Region are qualitative variables and, as consequence, we do not included in this table.
guarantee that our results are robust, beyond the Hausman test and
F test, which are used to choose the fixed effects, we account for
heteroscedasticity and/or autocorrelation via clustered standard
errors. Also, we conducted unit root tests and a co-integration test
that corroborated the adequacy of our analysis. Although our in-
dependent variable was lagged to reduce concerns with reserve
causality, we ran the Granger causality test to be sure that the in-
vestments in innovation in our sample are “causing” the financial
performance and not the other way around. Finally, we conducted
additional post-hoc analyses: because we could not use the time-
invariant control variables in the fixed effects model, we esti-
mated models for sub-samples for specific sectors/regions with
enough data. Moreover, we used an alternative measure of inter-
nationalization to increase the robustness of our results.
Given the multiplicity of starting points (e.g., patent application,
disclosure or granting) and ending points (e.g., market launch,
commercial success, break-even point, or stock value) in innovation
studies (Gerken et al., 2015), it is important to clarify the standards
of our study. Similar studies, such as the one by Ernst (2001),
suggested that the effect of a patent application on sales lasts no
more than 3 years, which reinforces the need to use time lags in
patent studies. Considering this duration, we adopted the median-
split to investigate different time lags: zero (t-0) and 1 year (t-1) as
“short-term”, and 2 years (t-2) and 3 years (t-3) as “long-term”. This
strategy supports a better understanding of the effects of green
innovation intensity on companies’ performance. Furthermore,
Przychodzen and Przychodzen (2015) also conducted analyses for
lagged eco-innovation and financial performance.
4. Results
4.1. Descriptive statistics
Table 1 shows the variables that compose this study in terms of
mean, variance, and minimum and maximum values, as well as the
correlation matrix and the respective significance, which do not
suggest concerns regarding multicollinearity.
4.2. Hypotheses test
Table 2 shows the results for the first hypothesis. We estimated
five models by gradually adding the time lags. Hypothesis 1 pre-
dicts that green innovation intensity positively influences the
financial performance of MNEs in the longer-term. The results
support our prediction: Model 4 (b ¼ 0.0614, p. < 0.01) and Model 5
(b ¼ 0.0711, p. < 0.01) suggest a positive and significant association
between green innovation intensity and financial performance
with 2 years of lag (t-2). In Model 5 (b ¼ 0.0461, p. < 0.05), we found
that there is also a significant and positive association between
these two variables in t-3.
However, in Models 3, 4, and 5, we also found statistical evi-
dence that there is an association of green innovation on the
financial performance at the shorter-term (t-1). All five models
Min Max 1 2 3 4 5 6
70.110 61.500 1.000
0 72.368 0.061* 1.000
0 100 0.019 0.037* 1.000
0 44.089 0.024 0.065* 0.184* 1.000
388 460000 0.048* 0.036* 0.069* 0.039* 1.000
0.020 59.230 0.334* 0.073* 0.052* 0.152* 0.041* 1.000
 L.A. Rezende et al. / Journal of Cleaner Production 233 (2019) 993e1003 997

Table 2
Estimation results e Hypothesis 1.

Variables Model 1 Model 2 Model 3 Model 4 Model 5

Independent
Green innovation intensity (t-0) 0.004 0.010 0.001 0.018
(0.023) (0.025) (0.026) (0.029)

Green innovation intensity (t-1) 0.037* 0.047** 0.046**

(0.021) (0.020) (0.022)

Green innovation intensity (t-2) 0.061*** 0.071***

(0.021) (0.024)

Green innovation intensity (t-3) 0.046**

(0.023)

Controls
R&D Intensity 1.545*** 1.545*** 1.645*** 1.704*** 1.584***
(0.184) (0.184) (0.206) (0.242) (0.234)

Number of employees 1.11e-05 1.11e-05 9.10e-06 1.13e-06 7.60e-06

(9.41e-06) (9.41e-06) (1.02e-05) (1.11e-05) (1.25e-05)

Tobin's Q 0.324*** 0.324*** 0.299*** 0.252** 0.319*

(0.105) (0.106) (0.102) (0.122) (0.178)

Intercept 13.670*** 13.660*** 13.930*** 13.490*** 12.150***

(0.952) (0.948) (1.033) (1.181) (1.156)

Observations 3,560 3,560 3,204 2,848 2,492

Number of firms 356 356 356 356 356
R-squared (within) 0.162 0.162 0.168 0.167 0.174
F test 28.100*** 21.260*** 15.130*** 10.860*** 9.156***

Note. ***p.< 0.01; **.p < 0.05; *.p < 0.10.

Robust standard errors clustered on firm-years in parentheses. Year dummies were included in the model but omitted from the table.

suggest a non-significant association with a lag of zero (t-0). In
addition, all models, including the baseline model (Model 1), sug-
gest significant results for two of our control variables: R&D in-
tensity and Tobin's q. The first is negatively associated with
financial performance, and the second has a positive association.
Fig. 1 summarizes our findings: Green innovation intensity
positive association with financial performance lasts over time, and
there is a peak 2 years after the patent application. Considering that
the ROA in our sample is 6.594 on average (see Table 1), the co-
efficients ranging from 0.018 to 0.071 imply that one percentual of
green patents added to the portfolio increases firms returns by
0.27e1.08% per year.
Next, we investigate the moderating effect of internationaliza-
tion. Hypothesis 2 predicts that the degree of internationalization
positively moderates the relationship between green innovation
intensity and financial performance of MNEs. Table 3 shows the

Fig. 1. Estimation results - Hypothesis 1.

Note. Coefficients from model 5 - Table 2.
998 L.A. Rezende et al. / Journal of Cleaner Production 233 (2019) 993e1003

Table 3
Estimation results - Hypothesis 2.

Variables Model 6 Model 7 Model 8 Model 9

Independent
Green innovation intensity (t-0) 0.024 0.005 0.003 0.024
(0.031) (0.035) (0.038) (0.035)

Green innovation intensity (t-1) 0.032 0.034 0.054**

(0.033) (0.032) (0.026)

Green innovation intensity (t-2) 0.088*** 0.092***

(0.027) (0.028)

Green innovation intensity (t-3) 0.033

(0.032)

FATA 0.012 0.015 0.019 0.018

(0.011) (0.012) (0.014) (0.012)

Interactions
Green innovation (t-0)  FATA 0.001 0.001 3.33e-06 0.001
(0.001) (0.001) (0.001) (0.001)

Green innovation (t-1)  FATA 0.000 0.000 0.001

(0.001) (0.001) (0.001)

Green innovation (t-2)  FATA 0.001 0.001

(0.001) (0.001)

Green innovation (t-3)  FATA 0.000

(0.001)

Controls
R&D Intensity 1.552*** 1.653*** 1.709*** 1.585***
(0.185) (0.207) (0.242) (0.232)

Number of employees 1.12e-05 9.14e-06 9.22e-07 7.72e-06

(9.43e-06) (1.01e-05) (1.11e-05) (1.24e-05)

Tobin's Q 0.323*** 0.297*** 0.248** 0.309*

(0.105) (0.101) (0.119) (0.176)

Intercept 14.020*** 14.360*** 14.030*** 12.710***

(1.067) (1.154) (1.313) (1.272)

Observations 3,560 3,204 2,848 2,492

Number of firms 356 356 356 356
R-squared (within) 0.164 0.170 0.170 0.180
F test 14.670*** 10.350*** 7.924*** 6.299***

Note. ***.p < 0.01; **. p < 0.05; *. p < 0.10.

Robust standard errors clustered on firm-years in parentheses. Year dummies were included in the model but omitted from the table.

results. We could not find statistical support for Hypothesis 2. This
result applies to all models obtained and all time lags (t-0, t-1, t-2,
and t-3).
4.3. Post-hoc analysis
To verify the robustness of our models, we conducted a post-hoc
analysis. To do so, we analyzed sub-samples to compare sectors
(Table 4) and regions (Table 5). In addition, we used another
internationalization metric to validate the previous results
(Table 6). Table 4 shows that the results were confirmed for
manufacturing firms (Model 10): Green innovation intensity is
positively related to financial performance in the longer-term (t-2
and t-3) and in the shorter-term (t-1). However, the same is not
valid for non-manufacturing firms (Model 11), which includes firms
of the extractive industry, information and technology, and service
sectors.
Table 5 shows that when it comes to the region, companies from
Europe (Model 13) and Asia (Model 14) present better financial
performance from green innovations in the longer-term, which is
consistent with our previous results. European firms also experi-
ence this effect in the shorter-term (t-0 and t-1), but with less
significance. The exception is North America (Model 12): There is
no significant association of green innovations and the perfor-
mance of the companies from this region. It is worth pointing out
that in our original sample, there were 2 companies from Oceania,
but because the sample was too small, we did not conduct an
analysis for this region.
Finally, we used an alternative measure of internationalization
to test Hypothesis 2: foreign sales in relation to total sales (FSTS).
FSTS represents a financial measure, which shows the penetration
in the external market through the exportation of products
(Ruigrok and Wagner, 2004). As shown in Table 6, our previous
results were confirmed: The degree of internationalization does not
moderate the relationship between green innovation intensity and
financial performance. This result is valid for all models and time
lags.
5. Discussion
The results show that the effect of green innovation intensity on
the performance of multinational companies starts to appear 1 year
after the patent application, and it lasts after 2 and 3 years. The
largest effect is perceived in the second year.
Because the green innovation intensity metric used in this work
was the green patent, the time for return found here are shorter
than the findings of Ernst (2001), who found that patent filing (in
general, not only green) takes from 2 to 3 years to generate an in-
crease in sales. However, we found that there is an association in
just 1 year, which suggests that green patents can result in a
 L.A. Rezende et al. / Journal of Cleaner Production 233 (2019) 993e1003 999

Table 4
Estimation results - Hypothesis 1 (comparing sectors).

Variables Model 10 - Manufacturing Firms Model 11 - Non Manufacturing

Independent
Green innovation intensity (t-0) 0.012 0.123
(0.030) (0.089)

Green innovation intensity (t-1) 0.041** 0.298

(0.021) (0.353)

Green innovation intensity (t-2) 0.070*** 0.092

(0.024) (0.167)

Green innovation intensity (t-3) 0.047** 0.029

(0.023) (0.110)

Controls
R&D Intensity 1.687*** 1.123***
(0.273) (0.344)

Number of employees 1.00e-05 7.95e-07

(2.19e-05) (1.42e-05)

Tobin's Q 0.305 0.431

(0.192) (0.392)

Intercept 11.770*** 13.870***

(1.390) (2.471)

Observations 2,149 343

Number of firms 307 49
R-squared (within) 0.186 0.124
F test 8.202*** 3.961***

Note. ***p. < 0.01; **p. < 0.05; *p. < 0.10.
Robust standard errors clustered on firm-years in parentheses. Year dummies were included in the model but omitted from the table.

Table 5
Estimation results - Hypothesis 1 (comparing regions).

Variables Model 12 North America Model 13 Europe Model 14 Asia

Independent
Green innovation intensity (t-0) 0.024 0.075* 0.012
(0.083) (0.043) (0.033)

Green innovation intensity (t-1) 0.003 0.058* 0.039

(0.069) (0.035) (0.027)

Green innovation intensity (t-2) 0.009 0.121*** 0.062***

(0.080) (0.037) (0.023)

Green innovation intensity (t-3) 0.010 0.059** 0.042

(0.068) (0.029) (0.031)

Controls
R&D Intensity 1.749*** 1.017*** 1.544***
(0.372) (0.298) (0.232)

Number of employees 1.88e-05 6.06e-06 1.68e-05*

(1.92e-05) (3.02e-05) (9.95e-06)

Tobin's Q 0.183 0.918*** 1.375***

(0.158) (0.285) (0.410)

Intercept 18.680*** 7.321*** 5.285***

(2.344) (1.601) (1.065)
Observations 1,043 581 854
Number of firms 149 83 122
R-squared (within) 0.188 0.168 0.226
F test 3.325*** 5.520*** 16.950***

Note. ***.p < 0.01; **.p < 0.05; *. p < 0.10.

Robust standard errors clustered on firm-years in parentheses. Year dummies were included in the model but omitted from the table.

financial return faster than patents in general. One possible
explanation for our results is that environmentally concerned
consumers demand green products, but the actual offer on the
market is still low compared to traditional products. So, when a
green product is launched, its adoption by consumers could be
faster, which would boost the financial return for the inventor.
Aside from that, programs implemented by some countries to
accelerate the granting of green patents allow companies to license
green technologies sooner, helping them reduce the time it takes
for a product to reach the market (Dechezlepre^tre, 2013), which can
lead companies achieving a faster financial return from green in-
novations. Additionally, policies (or behaviors) that encourage
sustainability may stimulate a collective race for the development
of technologies that in turn accelerate the innovation cycle and its
financial return, such as the development of LED lamps or super
batteries for the automotive industry (Markard, 2018).
1000 L.A. Rezende et al. / Journal of Cleaner Production 233 (2019) 993e1003

Table 6
Estimation results - Hypothesis 2 (alternative measure of internationalization.

Variables Model 15 Model 16 Model 17 Model 18

Independent
Green innovation intensity (t-0) 0.017 0.009 0.007 0.021
(0.031) (0.034) (0.037) (0.032)

Green innovation intensity (t-1) 0.034 0.007 0.014

(0.035) (0.034) (0.035)

Green innovation intensity (t-2) 0.100*** 0.101***

(0.032) (0.030)

Green innovation intensity (t-3) 0.038

(0.040)

FSTS 0.013 0.006 0.005 0.023**

(0.008) (0.009) (0.010) (0.010)

Interactions
Green innovation (t-0)  FSTS 0.000 0.000 9.85e-05 9.29e-05
(0.001) (0.001) (0.001) (0.001)

Green innovation (t-1)  FSTS 8.94e-05 0.001 0.001

(0.001) (0.001) (0.001)

Green innovation (t-2)  FSTS 0.001 0.001

(0.001) (0.001)

Green innovation (t-3)  FSTS 0.000

(0.001)

Controls
R&D Intensity 1.547*** 1.647*** 1.702*** 1.573***
(0.184) (0.206) (0.242) (0.235)

Number of employees 1.02e-05 8.70e-06 7.30e-07 6.49e-06

(9.47e-06) (1.02e-05) (1.12e-05) (1.28e-05)

Tobin's Q 0.323*** 0.298*** 0.251** 0.314*

(0.106) (0.102) (0.122) (0.177)

Intercept 14.320*** 14.230*** 13.210*** 10.910***

(1.011) (1.117) (1.294) (1.332)
Observations 3,560 3,204 2,848 2,492
Number of firms 356 356 356 356
R-squared (within) 0.163 0.168 0.168 0.177
F test 15.800*** 9.605*** 7.321*** 7.532***

Note. ***.p < 0.01; **. p < 0.05; *.p < 0.10.
Robust standard errors clustered on firm-years in parentheses. Year dummies were included in the model but omitted from the table.

When it comes to how our results behave, we noted that there is
an initial impact on performance in the first year, then a peak in the
second year, and finally a decline in the third year after the patent
application. This is similar to the technology life-cycle, which has
the initial phase, the growth and maturity phase, and finally the
decline phase. So, our results suggest that the financial return ob-
tained through green innovation follows the cycle of the technol-
ogy. The decline in 3 years probably happens because of technology
obsolescence.
Additionally, our results suggest that the sector and region
matters when it comes to green innovations’ relationship with
performance. Non-manufacturing firms, for example, do not pre-
sented improvements in financial performance from green patents;
this is likely because it is harder for companies in sectors such as
services and information to develop green technologies. It seems
that manufacturing companies can take more advantage of green
innovations, as the latter are useful for reducing waste, bringing
more efficiency to the production process, and creating goods/
products with a sustainable appeal. Another factor that strengthens
this result is that some industrial sectors, such as those that pollute
highly, are prone to suffering some kind of sanction from their
stakeholders or to being blamed for having negative effects on the
environment or society (Perez-Batres et al., 2012). For this reason,
these companies are more likely to invest in green innovation.
In Europe, our results showed that there is a return from green
innovations in t-0, but in North America, we could not find an as-
sociation between financial performance and green innovation.
This result corroborates van Zanten and van Tulder (2018), who
concluded that European multinationals engage with more sus-
tainable practices than those from North America. This seems to
reflect a reaction to the environment where a company is located,
and European companies have been noted to apply “precautionary
principles” that prevail in Europe (Doh and Guay, 2006). This
probably contributes to an appearance of green innovation results
sooner.
Accordingly, the main drivers of green innovation are the
technology, market, and regulatory environment (Rennings, 2000).
This means that companies can use green innovation mainly to
meet customers’ and government pressures. These three drivers
(technology, market, and regulatory environment) build a context
that may influence the success (or failure) of innovation programs.
This can explain why we found differences between the regions;
each one has its own particularities.
Regarding Hypothesis 2, when green innovation strategy is
carried out at the same time as a company increases its participa-
tion in foreign markets, no influence on performance is observed.
Although international activities make firms more successful in
terms of innovation production (Siedschlag and Zhang, 2015), it is
likely that the high costs of maintaining investments in several
countries, such as coordination and follow-up costs (Ruigrok and
 L.A. Rezende et al. / Journal of Cleaner Production 233 (2019) 993e1003 1001

Wagner, 2004), overshadow the performance of multinationals 6.2. Limitations and future research
that have a high degree of internationalization. Multinationals may
thus improve their degree of internationalization just to explore Four limitations can be explored in future studies. First,
intangible assets (and innovate), such as managerial knowledge although patents are one of the main results of the innovation
and know-how; that is, internationalization may represent a more process, not all inventions are patentable, and not all those that
strategic choice for companies without the main purpose of could be given patents are, in fact, deposited by companies
generating a direct impact on performance (Dess et al., 1995). (Lindman and So € derholm, 2016). Future studies may use different
green innovation metrics to clarify the generalization boundaries
of our conclusions. Second, following previous research on patent
6. Conclusion
data (ie., Ernst, 2001) and given the recent classification of green
patents, we adopted a time lag limited to 3 years. However,
The main objective of this study was to investigate the asso-
future research could explore the effect of green patent intensity
ciation of green innovation intensity and the financial perfor-
on financial performance across longer periods. Issues such as
mance of multinational companies over time and to examine if the
technology obsolescence and spillovers in green innovations still
degree of internationalization moderates the relationship be-
need to be better discussed in the literature. Third, our study
tween green innovation and performance. For this, we used a fixed
focuses on MNEs and, therefore, departs from a traditional view
effect panel regression to analyze data from 356 multinational
of the internationalization process. Companies following other
companies. The main finding was the confirmation of Hypothesis
strategies of internationalization, such as startups, operate in a
1: Green innovation intensity is positively associated with the
different dynamic in terms of speed and in terms of organiza-
financial performance of multinational companies in the longer-
tional values. Accordingly, connecting the startup literature to
term (2 and 3 years after the green patent application). Howev-
green innovation may render a better understanding of this
er, we also found that there is an association in the shorter-term (1
phenomenon in companies with different structures. Finally,
year after the patent application). Therefore, because the impact
because we are not taking advantage of a natural experiment
does not happen immediately, our results provide empirical evi-
with an exogenous shock, we do not claim in the paper anything
dence that the return of green innovations is conditional to time.
beyond an association between green innovation intensity and
We could not confirm Hypothesis 2. The degree of international-
financial performance.
ization does not moderate the relationship between green inno-
vation intensity and performance. Therefore, being more
internationalized does not guarantee that green innovation will Acknowledgments
impact a company's performance.
We acknowledge the reviewers and the Associate Editor Charbel
Jose Chiappetta Jabbour for the interesting issues raised during the
6.1. Implications for theory and practice review process of this paper. We also thank Pedro Makhoul for the
valuable comments on the previous version of the manuscript. An
This paper contributes to both green innovation and interna- earlier version of this paper was presented at the AIB 2018 Annual
tional business literature. First, in green innovation literature, this Meeting (Minneapolis - USA).
is one of the first studies to evaluate the relationship between
green innovation and performance over time by using the green
patent as a metric (as it is a recent classification). It also contrib- APPENDIX
utes to the discussion about green innovation's effects on perfor-
mance; so far, a relationship whose lack of consensus in the results
impels an evaluation of the particularities of innovation that will
Table 7
bring better results to the company. Our study shows empirical Results of unit root tests for panel data
evidence that green innovation and performance are positively
Variables LevineLineChu HarriseTzavalis Hadri
associated not only in the longer-term but also in the shorter-
test test Lagrange
term. Second, we also analyzed the specificity of this relation- multiplier
ship by observing that the degree of internationalization does not stationarity
moderate it, as the effort put toward international activity could test
be greater than the amount of the external knowledge that it helps Green Innovation 9.802*** 0.084*** 11.154***
MNCs access. Intensity
The main implication for both managers and policy makers is FATA 1.0eþ03*** 0.348*** 27.655***
FSTS 17.796*** 0.447*** 40.663***
to show that green patents are associated with an improvement of
financial performance and, according to our results, that this re- Note. ***. < 0.01; **. < 0.05; *. < 0.10.
turn can be faster than usually expected, as there is a perception of
an apparent trade-off between green innovation (and other sus-
tainable practices) and short-term performance due to the high
investments required to develop cleaner technologies and pro-
cesses. This reinforces the importance of the existence of public Table 8
policies and regulations that encourage companies to adopt more Results of cointegration test for panel data
sustainable practices. Likewise, managers need to be more willing Variables Statistics (Kao test)
to take risks and take a proactive stance toward sustainability by
Modified Dickey-Fuller t 4.674***
making consistent investments in green innovation. On the other Dickey-Fuller t 6.729***
hand, according to our results, managers cannot expect Augmented Dickey-Fuller t 2.803***
improvement in the relationship between green innovation and Unadjusted modified Dickey-Fuller t 21.438***
performance from the increase in the company's degree of Unadjusted Dickey-Fuller t 25.495***

internationalization. Note. ***. < 0.01; **. < 0.05; *. < 0.10.
1002 L.A. Rezende et al. / Journal of Cleaner Production 233 (2019) 993e1003

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