Market Demand, Green Innovation, and Firm Performance: Evidence from Hybrid Vehicle Industry

Purpose: Despite the stimulating roles of market demand and green issues to green innovation and business success, the relationships among these aspects remains controversial. The lack of the consensus on these links causes a missing research gap in the extant literature. This study aims to examine the mediating effect of green innovation and environmental performance on the relationship between market demand and firm performance in Taiwanese hybrid vehicle industry. Design/methodology/approach: The Taiwanese hybrid vehicle industry was targeted as the main research scope. Using random sampling method, survey questionnaires were distributed to retailers, wholesalers, and component sale firms in the automobile industry through post, e-mails, and fax. The Structural Equation Modeling (SEM) approach was used to test the hypotheses and the theoretical model. Findings: The findings prove the significant impacts between market demand and green innovation as well as environmental performance to firm performance; however, the mediating effects of green innovation and environmental performance remain insufficient. Practical implications: The results strongly suggests firms to make more efforts to understand customer needs and excel their competencies in innovating products and processes in a green manner to better align green innovation initiatives with consumer values to promptly satisfy market demand and achieve more effective competitive advantages. Originality/value: This research is the first of its kind to establish the theoretical model for investigating the links among market demand, green innovation, environmental performance, and firm performance in Taiwanese hybrid vehicle industry, which contributes to the understanding of green issues in this competitive industry. As such, the findings helpfully provide effective guidelines for firms in achieving first-mover advantages, market leadership, and sustainable competitiveness.