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Firms, Finance and Sustainable Transitions

The Financial Constraints of Eco-Innovation Companies

Edgardo Sica

This thought-provoking book introduces a financial economics perspective to the topic of eco-innovations and, more generally, sociotechnical transitions. It develops a model that illustrates how financial constraints can prevent the development of eco-innovations within companies and hinder the transition process towards a more sustainable regime. Edgardo Sica presents a review of the state of the art, as well as new data from original surveys aimed at testing the impact of financial constraints on eco-innovative decisions at radical and niche levels.
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Chapter 4: Eco-innovations and companies’ financial constraints: a multi-level perspective model

The Financial Constraints of Eco-Innovation Companies

Edgardo Sica

Extract

This chapter presents a multilevel perspective model based on the theoretical setting of the evolutionary theory. The model tries to capture the complexity of EIs’ contribution to the transition from the current (unsustainable) regime to a green economy where EIs become the market standard. In this framework, the model identifies the role played by the financial constraints in hindering the eco-innovative decisions of companies. On the one hand, financial constraints may impede regime level companies from developing or adopting incremental EIs that would otherwise allow niche-level EIs to enter the dominant regime. On the other, financial constraints can affect the development of radical EIs at niche level, by negatively influencing the niches readiness. In this way, financial constraints delay the alignment process among socio-technical levels, jeopardising the transition towards a more sustainable regime.

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