Digital Capabilities and Firm’s Growth: The Mediating Role of Environmental Innovation and the Moderating Role of Firm Size

Pedro Mota Veiga ()
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Pedro Mota Veiga: University of Maia

Chapter Chapter 10 in Advances in Applied Microeconomics, 2025, pp 165-179 from Springer

Abstract: Abstract This article analyzes the dynamics between digital capabilities and business growth, presenting a comprehensive analytical framework. It emphasizes the direct influence of digital capabilities on business growth and suggests that environmental innovation plays a mediating role in this relationship. Additionally, the study explores the impact of firm size on the interplay between digital capabilities and business growth. It proposes that company size moderates the direct impact of digital capabilities on growth. Expanding on this, the article also suggests that company size moderates the mediating effect of environmental innovation on the overall impact of digital capabilities on growth. To support these findings, data from the Flash Eurobarometer 486 survey are used, providing an understanding of the challenges faced by 11,948 micro, small, and medium-sized enterprises (MSMEs) located in the European Union. These challenges encompass navigating growth complexities, integrating sustainable practices, and adopting digital technologies. Hypothesis testing employs multivariate ordinal logistic regression analysis, contributing to a nuanced understanding of how digital capabilities and environmental innovation collectively influence business growth, taking organizational dimensions into account. The results indicate that digital capabilities have a significant positive impact on business growth, both in terms of employment and turnover. Environmental innovations also positively influence business growth, although their impact is moderated by firm size. Larger firms benefit more from digital capabilities in terms of employment growth, while the relationship between environmental innovations and business growth is stronger in smaller firms. These findings highlight the necessity for tailored strategies that consider firm size when leveraging digital capabilities and environmental innovations for growth.

Keywords: Digital capabilities; Employment growth; Environmental innovation; Firm size; Firm’s growth; MSMEs; Turnover growth (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-3-031-76654-1_10

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DOI: 10.1007/978-3-031-76654-1_10

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