Green manufacturing for sustainable development: The positive effects of green activities, green investments, and non‐green products on economic performance

Abstract This article explores the impact of green manufacturing practices, disentangled in green activities, green investments, and the type of product made, on the economic performance of firms. Using survey data collected by European Commission from European small‐ and medium‐sized enterprises (SMEs), we adopt the self‐determination theory to investigate the extent to which the number of green activities, green investments, and type of product made affects a firm's economic performance. We argue that consumers are affected by firms' green manufacturing practices in response to the pressing environmental issues affecting our era. Our results reveal that while the number of green activities has a positive effect on economic performance, the amount of green manufacturing investments has an inverted U‐shaped relationship to economic performance and that this effect is positively moderated if a company also sells non‐green products. Our study contributes to the literature on green manufacturing by dissecting the effect of green manufacturing practices on a company's economic performance. Our findings also provide managers with advice on the right balance of green practices that most benefit their companies.