Institutional Context and Energy-Efficient Innovation: Are SMEs Flying Under the Radar?

Abstract

Relying on the institutional theory, a conceptual framework is developed, which hypothesises that institutional features are creating an environment that significantly influences energy-efficient innovation (EEI) activities at a firm level. Economic, regulatory and social features are argued to support firms, but also exert pressures on them to introduce EEI. Furthermore, the analysis is extended to study how the institutional context is moderated by one of the most prominent features of a firm, i.e. its size. In this way, we contribute both to the literature examining the role of the institutional context in shaping economic activities, and the scientific and policy discourse on energy-efficiency in small and medium enterprises (SMEs) and large incumbent enterprises (LEs). The developed hypotheses are tested in a cross-country setting, using a cross-sectional sample of 9 European countries based on Community Innovation Survey (CIS) microdata, complemented with country-level information from various sources. The achieved results support the main hypothesis that institutional characteristics foster EEI. Moreover, different institutional dimensions are found to be working differently depending on the firm size. Compared to LEs, SMEs are found to be more sensitive to regulatory rather than economic and social institutional characteristics. We offer several interpretations for these somewhat controversial and thought-provoking results. Based on these, we propose implications for policy interventions that could enhance the quality of energy-efficient innovation activities, as well as insightful findings to managers of both small and large corporations.