Environmental Innovations in Small and Medium Sized Enterprises

Abstract

Supporting and accelerating the adoption and diffusion of environmental innovations amongst small and medium sized enterprises (SMEs) is a major challenge to environmental policy makers. Research suggests that whilst SMEs possess high flexibility, their innovative capacity may be limited to incremental changes within their existing technology system and network. Twenty case studies examining the innovation adoption process in SMEs in four sectors and in five countries within the ENVIS project (commissioned by the EU) revealed great variety in factors driving this process. Findings indicate that this variation can be attributed to the character of the environmental innovation, the specific business opportunity, the regulatory setting and pressure experienced by the sector. Based on these findings an analytical framework is suggested, whereby the environmental innovative capability of SMEs is conceived as the result of an interplay between the competencies, the network relations and the strategic orientation of the company (the 'dynamic triangle'). This indicates that policy to support SME's adoption of environmental innovations has to take an integrated form, i.e. addressing and developing competence, networks and strategic orientation of SMEs simultaneously whilst remaining systemic and context sensitive.