Environmental Orientation as a Determinant of Innovation Performance in Young SMEs

The popular press, as well as most academic literature, claims that innovation activities areinherently linked to higher company performance. Successful innovations usually increase the firm’s market scope or reduce costs, helping firms to obtain superior benefits. Therefore, most innovations are developed with those objectives in mind. Environmental orientation is defined as the managerial recognition of the significance of the impact a company has on the environment, and the need to minimize such impact. Nowadays, environmental motivation for innovation is becoming more and more common as firms are more aware of the consequences of their activities and attempt to be socially responsible. However, most literature on innovation is focused on R&D and on large mature firms, practically neglecting small and medium sized Enterprises – SMEs-, as does the literature on corporate social responsibility. In this paper, we focus on a sample of 1337 start-up SMEs less than 10 years old, from which we obtained information regarding their innovation activities. Our results show that in comparison to cost-oriented innovations, environmental orientation in the development of innovations increases performance.