Green innovation and firm value: Evidence from Indonesian listed companies
Keywords:
Firm value, green innovation, green process innovation, green product innovation, resource-based viewAbstract
This study examines the effect of green innovation on firm value among publicly listed companies participating in the Corporate Performance Rating Program (PROPER) in Indonesia during the 2021–2024 period. Grounded in the Resource-Based View (RBV) theory, the study argues that green innovation constitutes a valuable strategic resource that enables firms to achieve sustainable competitive advantage while supporting long-term environmental sustainability. Specifically, green innovation is considered a unique organizational capability that is valuable, rare, difficult to imitate, and non-substitutable, thereby enhancing firm value. The sample was selected using purposive sampling, consisting of companies listed on the Indonesia Stock Exchange that consistently published financial and sustainability reports throughout the observation period, resulting in 228 firm-year observations. Panel data regression analysis was employed, and the Random Effect Model (REM) was selected as the most appropriate estimation method based on the Chow, Lagrange Multiplier, and Hausman tests. The findings reveal that green process innovation has a positive and significant effect on firm value, whereas green product innovation exhibits a positive but conditional effect. Specifically, green product innovation becomes statistically significant only when green process innovation is excluded from the regression model, indicating differences in the relative contribution of the two dimensions of green innovation to firm value. These findings support the Resource-Based View by demonstrating that internal operational capabilities embedded in green process innovation provide a stronger and more sustainable source of competitive advantage than green product innovation, which is relatively easier for competitors to observe and imitate. The study highlights the importance of prioritizing process-oriented environmental innovation as a strategic approach to enhancing firm value and sustaining long-term corporate competitiveness.
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