Exploring Internal, Market and Institutional Dynamics That Drive Eco‐Innovation: Evidence From Portuguese Companies

This study examines the determinants of eco‐innovation adoption, drawing on data from 7083 firms in the 2014 Portuguese Community Innovation Survey. Although more recent waves of the survey reintroduced some questions related to environmental issues, the 2014 edition remains particularly valuable for its comprehensive coverage of eco‐innovation types and firm‐level characteristics relevant to this study. Using a hierarchical logistic regression, the analysis explores internal, market and institutional factors influencing eco‐innovation, including both intrafirm capabilities and end‐user–related dynamics. The results show that internal firm characteristics and market dynamics significantly influence eco‐innovation adoption, whereas institutional factors, such as subsidies and fiscal policies, exert comparatively limited effects. Moreover, the drivers of eco‐innovation within the firm align closely with those of overall eco‐innovation, underscoring the intrinsic nature of eco‐innovation processes. Nevertheless, challenges in leveraging end‐user consumption for eco‐innovation benefits highlight the need for targeted demand‐side interventions. These findings have critical implications for policymakers and businesses, advocating for revised policy frameworks and tailored strategies to foster eco‐innovation and sustainability.