The Impact of Green Technology Innovations on Firm's Sustainable Operations: Process Innovation and Recycling Innovation

As the urgency and importance of global carbon emission reduction have increased in recent years, numerous companies are considering ideas to develop innovative green technologies in order to contribute to the low-carbon economy. This paper examines two types of green technology innovations adopted by firms, namely process innovation (improving production processes to enhance energy efficiency) and recycling innovation (establishing a circular economy to recycle and re-manufacture waste products). By developing a game-theoretical model, our analytical results reveal the following findings. First, we find that both process and recycling innovations can attract more consumers and improve firm’s profit. Second, compared to a single innovation, the adoption of both process and recycling innovations (dual-technology innovation) leads to a further increase in consumer demand and firm’s profit. Interestingly, the equilibrium outcome suggests the existence of a “synergistic promoting effect” when the firm implements dual-technology innovation. Additionally, as consumers’ perception of greenness increases, the advantage of dual-technology innovation becomes more pronounced. Furthermore, the optimal price set by the firm becomes more sensitive to consumers’ perception of greenness when dual-technology innovation is adopted. Finally, we extend the base model by incorporating the firm’s budget for total investment. Our findings suggest that the budget constraint reduces the synergistic promoting effect of dual-technology innovation. These results can serve as guidelines for firms aiming to utilize green technology innovations in order to reduce carbon emissions.