Green innovation and financial performance: a systematic literature review

Abstract

Purpose- Green innovation has become a strategic imperative for firms responding to environmental pressures and stakeholder demands. However, the relationship between green innovation and financial performance remains inconclusive in the literature. This paper aims to synthesize empirical evidence on the nexus between green innovation and financial performance.

Design/methodology/approach- This study conducts a systematic literature review following the PRISMA protocol, analyzing 46 articles published between 2013 and 2025. The review identifies patterns of relationships, moderating and mediating factors, and research gaps.

Findings- The review finds that most studies report a positive relationship between green innovation and financial performance. However, negative or insignificant results emerge depending on innovation type, industry context, and market conditions. Key moderators include green dynamic capabilities, corporate governance, government support, green organizational culture, and firm life cycle. Environmental performance, ESG scores, and sustainability practices are identified as significant mediators.

Originality/value- This review provides a comprehensive synthesis of the contingent factors affecting the green innovation–financial performance link, offering a clear mapping of moderators and mediators. It also identifies underexplored areas for future research. The findings offer practical implications for managers and policymakers in designing effective green innovation strategies for sustainable financial outcomes.