Green Innovation in the Manufacturing Industry: A Longitudinal Approach

Despite substantial growth in eco-innovation (EI) research, most studies rely on cross-sectional data, limiting understanding of the temporal dynamics of EI and its determinants under varying macroeconomic conditions. This study addresses this gap by analysing panel data from Spanish manufacturing firms across three phases of the business cycle: pre-crisis expansion (2004–2007), the global financial crisis (2008–2013), and recovery (2014–2016). We investigate the drivers of two distinct types of eco-innovation: efficiency EI (energy and material savings) and environmental EI (reducing environmental harm), focusing on the role of regulation, institutional interventions, and firm-level innovation capacities. Using a random-effects panel probit model that accounts for unobserved firm heterogeneity, we examine how these drivers operate across different macroeconomic contexts. Our findings reveal that regulation consistently fosters EI, while the influence of subsidies, R&D capacity, and collaborative networks is more context-dependent, particularly during economic downturns. The results highlight the cumulative, path-dependent, and cyclical nature of EI, providing novel insights into the conditions that enable firms to sustain green innovation over time. Drivers of eco-innovation differ systematically between efficiency- and environment-oriented strategies, and these differences remain stable over the business cycle, implying distinct underlying mechanisms and policy implications. Accordingly, policy design—particularly during economic downturns—should distinguish between reinforcing incentives for internal efficiency improvements and sustaining regulatory and financial support for environmental EI.