Adoption of Green Innovation by Smes: A Sectoral Analysis

Small and Medium-sized Enterprises (SMEs) constitute the backbone of Ghana’s economy, accounting for approximately 90% of all businesses and playing a critical role in employment creation and economic growth. In recent years, the growing global emphasis on environmental sustainability has placed increased attention on the capacity of SMEs to adopt green innovations. This study examines the extent, drivers, and performance implications of green innovation adoption among Ghanaian SMEs, drawing exclusively on secondary data from reputable sources including the Ghana Statistical Service, World Bank Enterprise Surveys, and United Nations Development Programme (UNDP) reports. The analysis revealed a steady but uneven increase in adoption across sectors, with agriculture and industry leading, and the service sector showing slower progress. The findings also demonstrate that green innovation adoption is driven by a combination of external pressures and internal capacities. Regulatory enforcement, environmental certification requirements, and market demand from eco-conscious customers and foreign buyers were key external motivators. Access to finance, technical training, and the presence of sustainability-oriented leadership within firms emerged as important internal enablers. Together, these factors created a conducive environment for the uptake of eco-friendly technologies and processes. The results further showed that SMEs adopting green innovations consistently outperformed their non-adopting counterparts in revenue growth, productivity, and environmental compliance. These benefits appear to stem from cost savings through resource efficiency, enhanced market opportunities, and improved reputational capital. The study contributes to both theory and practice by applying the natural resource-based view (NRBV) theory to the Ghanaian SME context, demonstrating how environmental capabilities can yield strategic advantage. Policy implications highlight the need for targeted green finance schemes, sector-specific technical support, and regulatory frameworks that incentivize sustainable practices.

Green Innovation, Sectoral Analysis, Adoption

1. Abdallah, A.B., Al-Ghwayeen, W.S., Al-Amayreh, E.A.M. and Sweis, R.J., 2024. The impact of green supply chain management on circular economy performance: The mediating roles of green innovations. Logistics, 8(1), p.20. [Google Scholar] [Crossref]

2. Aboelmaged, M., 2018. The drivers of sustainable manufacturing practices in Egyptian SMEs and their impact on competitive capabilities: A PLS-SEM model. Journal of Cleaner Production, 175, pp.207-221. [Google Scholar] [Crossref]

3. Afum, E., Agyabeng-Mensah, Y., Baah, C., Acquah, I.S.K. and Osei, M.B., 2024. Empirical evidence of SMEs' ecopreneurship posture, green competitiveness and community-based performance: the neglected missing linkages of green practices. International Journal of Emerging Markets, 19(10), pp.2691-2711. [Google Scholar] [Crossref]

4. Ali, A., Jiang, X., Ali, A. and Qadeer, A., 2023. A moderated mediation model linking entrepreneurial leadership to green innovation: An upper echelons theory perspective. Creativity and Innovation Management, 32(1), pp.41-57. [Google Scholar] [Crossref]

5. Alraja, M.N., Imran, R., Khashab, B.M. and Shah, M., 2022. Technological innovation, sustainable green practices and SMEs sustainable performance in times of crisis (COVID-19 pandemic). Information Systems Frontiers, 24(4), pp.1081-1105. [Google Scholar] [Crossref]

6. Asamoah, D., Acquah, I.N., Nuertey, D., Agyei-Owusu, B. and Kumi, C.A., 2024. Unpacking the role of green absorptive capacity in the relationship between green supply chain management practices and firm performance. Benchmarking: An international journal, 31(8), pp.2793-2818. [Google Scholar] [Crossref]

7. Asare, D., Abubakari, M. and Mahama, M., 2025. How much is enough? Understanding the Sustainable Financing Model of Green Businesses in Developing Countries–Focusing on Green Enterprises in Ghana. Climate Action in Ghana, p.201. [Google Scholar] [Crossref]

8. Banerjee, S.B., 2001. Managerial perceptions of corporate environmentalism: Interpretations from industry and strategic implications for organizations. Journal of management studies, 38(4), pp.489-513. [Google Scholar] [Crossref]

9. Barba-Sánchez, V. and Atienza-Sahuquillo, C., 2016. Environmental proactivity and environmental and economic performance: Evidence from the winery sector. Sustainability, 8(10), p.1014. [Google Scholar] [Crossref]

10. Carrillo-Hermosilla, J., Del Río, P. and Könnölä, T., 2010. Diversity of eco-innovations: Reflections from selected case studies. Journal of cleaner production, 18(10-11), pp.1073-1083. [Google Scholar] [Crossref]

11. Cassells, S. and Lewis, K., 2011. SMEs and environmental responsibility: do actions reflect attitudes?. Corporate Social Responsibility and Environmental Management, 18(3), pp.186-199. [Google Scholar] [Crossref]

12. Chao, M. and Shih, C.T., 2018. Customer service-focused HRM systems and firm performance: evidence from the service industry in Taiwan. The International Journal of Human Resource Management, 29(19), pp.2804-2826. [Google Scholar] [Crossref]

13. Chege, S.M. and Wang, D., 2020. The impact of technology transfer on agribusiness performance in Kenya. Technology analysis and strategic management, 32(3), pp.332-348. [Google Scholar] [Crossref]

14. Chen, C.W., 2024. A framework of hybrid method for developing optimal sustainable product strategies and sustainable product roadmap. Sustainability, 16(4), p.1374. [Google Scholar] [Crossref]

15. Chen, Y.S., Lai, S.B. and Wen, C.T., 2006. The influence of green innovation performance on corporate advantage in Taiwan. Journal of business ethics, pp.331-339. [Google Scholar] [Crossref]

16. Cooper, R., 2020. Donor support for climate change initiatives in the Middle East and North Africa. [Google Scholar] [Crossref]

17. Creswell, J.W., 2013. Steps in conducting a scholarly mixed methods study. [Google Scholar] [Crossref]

18. Dangelico, R.M., Pujari, D. and Pontrandolfo, P., 2017. Green product innovation in manufacturing firms: A sustainability‐oriented dynamic capability perspective. Business strategy and the Environment, 26(4), pp.490-506. [Google Scholar] [Crossref]

19. del Rosario Reyes-Santiago, M., Sánchez-Medina, P.S. and Díaz-Pichardo, R., 2019. The influence of environmental dynamic capabilities on organizational and environmental performance of hotels: Evidence from Mexico. Journal of cleaner production, 227, pp.414-423. [Google Scholar] [Crossref]

20. Donbesuur, F., Ampong, G.O.A., Owusu-Yirenkyi, D. and Chu, I., 2020. Technological innovation, organizational innovation and international performance of SMEs: The moderating role of domestic institutional environment. Technological Forecasting and Social Change, 161, p.120252. [Google Scholar] [Crossref]

21. EPA Ghana. 2023. Annual Progress Report. Available at: https://cmo.epa.gov.gh/wp-content/uploads/2024/02/Article-6-Annual-Progress-Report-2023_final.pdf [Google Scholar] [Crossref]

22. Fayyaz, A., Lund-Thomsen, P. and Lindgreen, A., 2017. Industrial clusters and CSR in developing countries: The role of international donor funding. Journal of Business Ethics, 146(3), pp.619-637. [Google Scholar] [Crossref]

23. Fuso Nerini, F., Sovacool, B., Hughes, N., Cozzi, L., Cosgrave, E., Howells, M., Tavoni, M., Tomei, J., Zerriffi, H. and Milligan, B., 2019. Connecting climate action with other Sustainable Development Goals. Nature Sustainability, 2(8), pp.674-680. [Google Scholar] [Crossref]

24. García-Granero, E.M., Piedra-Muñoz, L. and Galdeano-Gómez, E., 2018. Eco-innovation measurement: A review of firm performance indicators. Journal of cleaner production, 191, pp.304-317. [Google Scholar] [Crossref]

25. Ghana Statistical Service (GSS) (2022). Ghana Statistical Service. Accessed from; https://www.statsghana.gov.gh/ [Google Scholar] [Crossref]

26. Ghana Statistical Service (GSS). 2024a. Ghana 2024 integrated business establishment survey I (IBES I). Available at https://statsghana.gov.gh/gssmain/fileUpload/pressrelease/IBES%20I_Volume%202%20report_Final.pdf [Google Scholar] [Crossref]

27. Ghana Statistical Service (GSS). 2024b. Ghana 2024 integrated business establishment survey I (IBES I). Available at https://statsghana.gov.gh/gssmain/fileUpload/pressrelease/IBES%20I_Volume%203%20main%20report_Final.pdf [Google Scholar] [Crossref]

28. Gomez-Trujillo, A.M., Gonzalez-Perez, M.A. and Baena-Rojas, J.J., 2024. Sustainable strategy as a lever for corporate legitimacy and long-term competitive advantage: an examination of an emerging market multinational. European Business Review, 36(1), pp.112-139. [Google Scholar] [Crossref]

29. Groening, C., Sarkis, J. and Zhu, Q., 2018. Green marketing consumer-level theory review: A compendium of applied theories and further research directions. Journal of cleaner production, 172, pp.1848-1866. [Google Scholar] [Crossref]

30. Ha, T.T.T. and Bush, S.R., 2010. Transformations of Vietnamese shrimp aquaculture policy: empirical evidence from the Mekong Delta. Environment and Planning C: Government and Policy, 28(6), pp.1101-1119. [Google Scholar] [Crossref]

31. Hair, J.F., Risher, J.J., Sarstedt, M. and Ringle, C.M., 2019. When to use and how to report the results of PLS-SEM. European business review, 31(1), pp.2-24. [Google Scholar] [Crossref]

32. Hall, P.V., O'Brien, T. and Woudsma, C., 2013. Environmental innovation and the role of stakeholder collaboration in West Coast port gateways. Research in Transportation Economics, 42(1), pp.87-96. [Google Scholar] [Crossref]

33. Halonen, H., 2024. Why do companies go green? Examining the drivers of sustainable self-regulation. [Google Scholar] [Crossref]

34. Hart, S.L. and Dowell, G., 2011. Invited editorial: A natural-resource-based view of the firm: Fifteen years after. Journal of management, 37(5), pp.1464-1479. [Google Scholar] [Crossref]

35. Hart, S.L., 1995. A natural-resource-based view of the firm. Academy of management review, 20(4), pp.986-1014. [Google Scholar] [Crossref]

36. Hart, S.L., 1995. A natural-resource-based view of the firm. Academy of management review, 20(4), pp.986-1014. [Google Scholar] [Crossref]

37. Herzallah, A.M., Iriqat, R.A.M., Zaki, K., Khalifa, G.S., Abdelfadel, T.A.A., Hamed, M.H. and Elnagar, A.K., 2025. Sustainable innovation as a catalyst: linking green supply chain practices to corporate reputation in emerging markets. Cleaner Logistics and Supply Chain, p.100245. [Google Scholar] [Crossref]

38. Hizarci‐Payne, A.K., İpek, İ. and Kurt Gümüş, G., 2021. How environmental innovation influences firm performance: A meta‐analytic review. Business Strategy and the Environment, 30(2), pp.1174-1190. [Google Scholar] [Crossref]

39. Hofstra, N. and Huisingh, D., 2014. Eco-innovations characterized: a taxonomic classification of relationships between humans and nature. Journal of Cleaner Production, 66, pp.459-468. [Google Scholar] [Crossref]

40. Horbach, J., 2008. Determinants of environmental innovation—New evidence from German panel data sources. Research policy, 37(1), pp.163-173. [Google Scholar] [Crossref]

41. Hu, Y., Sun, S. and Dai, Y., 2021. Environmental regulation, green innovation, and international competitiveness of manufacturing enterprises in China: From the perspective of heterogeneous regulatory tools. PLoS One, 16(3), p.e0249169. [Google Scholar] [Crossref]

42. Huber, J., 2008. Technological environmental innovations (TEIs) in a chain-analytical and life-cycle-analytical perspective. Journal of Cleaner Production, 16(18), pp.1980-1986. [Google Scholar] [Crossref]

43. Jain, S., Kalapurackal, J.J. and Balaji, V., 2024. Green Manufacturing and Performances in Apparel Export Industry: Mediating Role of Green Innovation. Environmental Research, Engineering and Management, 80(3), pp.99-110. [Google Scholar] [Crossref]

44. Kemp, R. and Pearson, P., 2007. Final report MEI project about measuring eco-innovation. UM Merit, Maastricht, 10(2), pp.1-120. [Google Scholar] [Crossref]

45. Kemp, R. and Pearson, P., 2008. Policy brief about measuring eco-innovation and Magazine/Newsletter articles. Maastricht: Um Merit. [Google Scholar] [Crossref]

46. Khan, A., Hussain, S. and Sampene, A.K., 2023. Investing in green intellectual capital to enhance green corporate image under the Influence of green innovation climate: A Case of Chinese Entrepreneurial SMEs. Journal of Cleaner Production, 418, p.138177. [Google Scholar] [Crossref]

47. Klewitz, J. and Hansen, E.G., 2014. Sustainability-oriented innovation of SMEs: a systematic review. Journal of cleaner production, 65, pp.57-75. [Google Scholar] [Crossref]

48. Kotler, P., 2011. Reinventing marketing to manage the environmental imperative. Journal of marketing, 75(4), pp.132-135. [Google Scholar] [Crossref]

49. Kumar, R., 2018. Research methodology: A step-by-step guide for beginners. [Google Scholar] [Crossref]

50. Le, T.T. and Ikram, M., 2022. Do sustainability innovation and firm competitiveness help improve firm performance? Evidence from the SME sector in Vietnam. Sustainable Production and Consumption, 29, pp.588-599. [Google Scholar] [Crossref]

51. Li, D., Zheng, M., Cao, C., Chen, X., Ren, S. and Huang, M., 2017. The impact of legitimacy pressure and corporate profitability on green innovation: Evidence from China top 100. Journal of cleaner production, 141, pp.41-49. [Google Scholar] [Crossref]

52. Liao, Z., 2018. Corporate culture, environmental innovation and financial performance. Business Strategy and the Environment, 27(8), pp.1368-1375. [Google Scholar] [Crossref]

53. López Pérez, G., García Sánchez, I.M. and Zafra Gómez, J.L., 2024. A systematic literature review and bibliometric analysis of eco‐innovation on financial performance: Identifying barriers and drivers. Business Strategy and the Environment, 33(2), pp.1321-1340. [Google Scholar] [Crossref]

54. Makate, C., Makate, M., Siziba, S. and Sadomba, Z., 2019. The impact of innovation on the performance of small-to-medium informal metal-trade enterprises in Zimbabwe. Cogent Business and Management, 6(1), p.1625095. [Google Scholar] [Crossref]

55. Maldonado-Guzmán, G., Garza-Reyes, J.A. and Pinzón-Castro, Y., 2021. Eco-innovation and the circular economy in the automotive industry. Benchmarking: An International Journal, 28(2), pp.621-635. [Google Scholar] [Crossref]

56. Marín-Vinuesa, L.M., Scarpellini, S., Portillo-Tarragona, P. and Moneva, J.M., 2020. The impact of eco-innovation on performance through the measurement of financial resources and green patents. Organization and Environment, 33(2), pp.285-310. [Google Scholar] [Crossref]

57. Mbo, M. and Adjasi, C., 2017. Drivers of organizational performance in state owned enterprises. International journal of productivity and performance management, 66(3), pp.405-423. [Google Scholar] [Crossref]

58. Mensah, I., 2022. Entrepreneurial networking, innovation and sustainable growth of small enterprises in Ghana (Doctoral dissertation, University of Cape Coast). [Google Scholar] [Crossref]

59. Ministry of Employment and Labour Relations (MoELR) (2022). Ghana Green Jobs Strategy. Accra: Government of Ghana. Accessed from; https://www.melr.gov.gh [Google Scholar] [Crossref]

60. Mulaessa, N. and Lin, L., 2021. How do proactive environmental strategies affect green innovation? The moderating role of environmental regulations and firm performance. International Journal of Environmental Research and Public Health, 18(17), p.9083. [Google Scholar] [Crossref]

61. Mutoko, M.C., Ritho, C.N., Benhin, J.K. and Mbatia, O.L., 2015. Technical and allocative efficiency gains from integrated soil fertility management in the maize farming system of Kenya. [Google Scholar] [Crossref]

62. Nketsiah, I. and Van der Westhuizen, T., 2025. Sustainable Decision-Making for SME Resilience: The Role of Governance and Leadership in Ghana. In Building a Green Future Through Essential Decision-Making Competencies (pp. 527-552). IGI Global Scientific Publishing. [Google Scholar] [Crossref]

63. Odoom, R., Odoom, P.T., Amu, P.Y. and Adams, M., 2025. Sustainable digital marketing practices and consumer brand engagement–a brand reputation mediation investigation. Journal of Strategic Marketing, 33(2), pp.254-270. [Google Scholar] [Crossref]

64. Oduro, S. and Haylemariam, L.G., 2025. Effect of social and environmental sustainability on SME competitiveness: a meta-analytic review. Management Review Quarterly, pp.1-32. [Google Scholar] [Crossref]

65. Oduro, S., 2020. Exploring the barriers to SMEs’ open innovation adoption in Ghana: A mixed research approach. International Journal of Innovation Science, 12(1), pp.21-51. [Google Scholar] [Crossref]

66. OECD, P.B., 2009. Sustainable manufacturing and eco-innovation: towards a green economy. Policy Brief-OECD Observer. [Google Scholar] [Crossref]

67. OECD. 2021. OECD Economic Outlook, Volume 2021 Issue 1. Available at: https://www.oecd.org/en/publications/2021/05/oecd-economic-outlook-volume-2021-issue-1_88e062cf.html [Google Scholar] [Crossref]

68. Omowole, B.M., Olufemi-Phillips, A.Q., Ofodile, O.C., Eyo-Udo, N.L. and Ewim, S.E., 2024. The role of SMEs in promoting urban economic development: A review of emerging economy strategies. Journal Name Unspecified. [Google Scholar] [Crossref]

69. Pan, X., Sinha, P. and Chen, X., 2021. Corporate social responsibility and eco‐innovation: The triple bottom line perspective. Corporate Social Responsibility and Environmental Management, 28(1), pp.214-228. [Google Scholar] [Crossref]

70. Porter, M.E. and Linde, C.V.D., 1995. Toward a new conception of the environment-competitiveness relationship. Journal of economic perspectives, 9(4), pp.97-118. [Google Scholar] [Crossref]

71. Prabhakar, A. (2025). A Sustainable and Inclusive Economic Development: A Global Imperative: A Global Imperative. Journal of Recycling Economy and Sustainability Policy, 4(1), 1-16. [Google Scholar] [Crossref]

72. Prieto-Sandoval, V., Jaca, C. and Ormazabal, M., 2018. Towards a consensus on the circular economy. Journal of cleaner production, 179, pp.605-615. [Google Scholar] [Crossref]

73. PURC. 2011. Renewable Energy Act, 2011 (Act 832). Available at: https://www.purc.com.gh/attachment/631538-20201207031245.pdf [Google Scholar] [Crossref]

74. Qi, G.Y., Shen, L.Y., Zeng, S.X. and Jorge, O.J., 2010. The drivers for contractors’ green innovation: an industry perspective. Journal of cleaner production, 18(14), pp.1358-1365. [Google Scholar] [Crossref]

75. Rennings, K., 2000. Redefining innovation—eco-innovation research and the contribution from ecological economics. Ecological economics, 32(2), pp.319-332. [Google Scholar] [Crossref]

76. Rodríguez-García, M., Guijarro-García, M. and Carrilero-Castillo, A., 2019. An overview of ecopreneurship, eco-innovation, and the ecological sector. Sustainability, 11(10), p.2909. [Google Scholar] [Crossref]

77. Rodríguez-Rebés, L., Navio-Marco, J. and Ibar-Alonso, R., 2021. Influence of organisational innovation and innovation in general on eco-innovation in European companies. Journal of Intellectual Capital, 22(5), pp.840-867. [Google Scholar] [Crossref]

78. Sanni, M., 2018. Drivers of eco-innovation in the manufacturing sector of Nigeria. Technological Forecasting and Social Change, 131, pp.303-314. [Google Scholar] [Crossref]

79. Saunders, M., Lewis, P. and Thornhill, A., 2009. Research methods for business students. Pearson education. [Google Scholar] [Crossref]

80. Saunders, M., Lewis, P. and Thornhill, A., 2009. Research methods for business students. Pearson education. [Google Scholar] [Crossref]

81. Seman, N.A.A., Govindan, K., Mardani, A., Zakuan, N., Saman, M.Z.M., Hooker, R.E. and Ozkul, S., 2019. The mediating effect of green innovation on the relationship between green supply chain management and environmental performance. Journal of cleaner production, 229, pp.115-127. [Google Scholar] [Crossref]

82. Singh, N., Park, Y.H., Tolmie, C.R. and Bartikowski, B., 2014. Green firm‐specific advantages for enhancing environmental and economic performance. Global Business and Organizational Excellence, 34(1), pp.6-17. [Google Scholar] [Crossref]

83. Tsai, K.H. and Liao, Y.C., 2017. Innovation capacity and the implementation of eco‐innovation: Toward a contingency perspective. Business Strategy and the Environment, 26(7), pp.1000-1013. [Google Scholar] [Crossref]

84. Ullah, A., 2025. Community and Institutional Drivers of Deforestation, Environmental Impacts, and Extension Interventions for Forest Management in the Hindu Kush Himalaya. Land Degradation and Development, 36(10), pp.3575-3586. [Google Scholar] [Crossref]

85. United Nations Conference on Trade and Development (2023). The potential of Africa to capture technology-intensive global supply chains. Accessed from:https://unctad.org/system/files/official-document/aldcafrica2023_en.pdf [Google Scholar] [Crossref]

86. United Nations Development Programme (UNDP). 2022. Annual Report. Available at: https://www.undp.org/sites/g/files/zskgke326/files/2023-04/Annual-Report-2022.pdf [Google Scholar] [Crossref]

87. Vence Deza, X. and PEREIRA, Á., 2018. Eco-innovation and Circular Business Models as drivers for a circular economy. [Google Scholar] [Crossref]

88. World Bank Enterprise Survey. 2023. Explore what businesses experience across the world Available at: https://www.enterprisesurveys.org/en/enterprisesurveys [Google Scholar] [Crossref]

89. Xie, X., Zhu, Q. and Wang, R., 2019. Turning green subsidies into sustainability: How green process innovation improves firms' green image. Business strategy and the environment, 28(7), pp.1416-1433. [Google Scholar] [Crossref]

90. Zhang, D., Rong, Z. and Ji, Q., 2019. Green innovation and firm performance: Evidence from listed companies in China. Resources, conservation and recycling, 144, pp.48-55. [Google Scholar] [Crossref]

91. Zhang, J., Adu Sarfo, P., Amankwah, O., George, N., Mohamed Wasaf, M., Appiah, A. and Bonzo, J.K., 2025. Harnessing the synergy between green organizational strategy and technological capability for sustainable development in SMEs in Sub-Saharan Africa. Business Process Management Journal. [Google Scholar] [Crossref]

92. Zhang, Y., Sun, J., Yang, Z. and Wang, Y., 2020. Critical success factors of green innovation: Technology, organization and environment readiness. Journal of cleaner production, 264, p.121701. [Google Scholar] [Crossref]