Technological Forecasting & Social Change 173 (2021) 121146

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Technological Forecasting & Social Change

journal homepage: www.elsevier.com/locate/techfore

Determinants of eco-innovation adoption of small and medium enterprises:

An empirical analysis in Myanmar
Myat Su Han a, Weiming Chen b, c, *
a
College of Business Administration, Capital University of Economics and Business, Beijing 100070, China
b
Center for Energy and Environmental Policy Research, Beijing Institute of Technology, Beijing 100081, China
c
School of Management and Economics, Beijing Institute of Technology, Beijing, 100081, China

A R T I C L E I N F O A B S T R A C T

Keywords: Despite the growing body of eco-innovation literature, the drivers of eco-innovation adoption of small and
Eco-innovation adoption medium enterprises (SMEs) in the least developing countries are relatively under-researched. Drawing on the
Firm innovation capabilities theory of reasoned action, this study uncovers the antecedents of SMEs’ adoption of eco-innovation in Myanmar.
Theory of reasoned action
We develop a conceptual model which we empirically test employing multiple regression analysis with the data
Small and medium enterprises
Myanmar
from a sample of SMEs in Myanmar (n = 800). Results find that customer demands, rivalry pressures, managerial
environmental concerns, environmental regulations, and firm innovation capabilities positively and significantly
influence the eco-innovation adoption of small and medium enterprises in Myanmar. Among the five de­
terminants, the influence of firm innovation capabilities is found to be the most significant. The research findings
offer insights to the policymakers, SMEs managers, and researchers on what drives SMEs’ adoption of eco-
innovation in Myanmar, which helps implement environmental policies and strategies to reduce the environ­
mental impact caused by economic growth in the context of least developing countries.

1. Introduction (Costantini et al., 2017; Colombo et al., 2019) as well as developing

countries such as Brazil (de Jesus Pacheco et al., 2018), China (Yu et al.,
Nowadays, more than ever, corporations are deeply concerned with 2016; Chen et al., 2017), India (Bhat and Momaya, 2020), and Malaysia
environmental issues such as global warming, environmental pollution, (Ch’ng et al., 2021). Relatively a few numbers of research have been
and climate change (Muhammad et al., 2020). That being the global done in the context of least developed countries. Considering that
case, achieving long-term economic growth that meets environmental eco-innovation may be tailored to a specific national context (Día­
and social concerns has become one of the major goals for many nations z-García et al., 2015) and that there exist significant variations in the
(e.g., Zubeltzu-Jaka et al., 2018; Bitencourt et al., 2020). Addressing determinants of eco-innovation, and its associations with firm perfor­
these issues, firms are paying attention to adopting eco-innovation mance are found to be different among various countries (Fernández
(García-Granero et al., 2020; Arranz et al., 2021), which enables them et al., 2021), it is necessary to conduct research on eco-innovation under
to create sustainable competitive advantage and reduce the economic different national conditions and boundary conditions.
impact on the environment (Afshari et al., 2020). Second, the drivers of environmental behaviors of small and medium
With the increasing emphasis on the adoption of eco-innovation, enterprises (SMEs) in the least developing countries are relatively under-
there exists a growing body of literature exploring the antecedents researched. This is also another considerable gap in the existing studies
and consequences of eco-innovation (e.g., Long et al., 2019; Forcadell given that SMEs in the least developing countries take responsibility for
et al., 2020; Kraus et al., 2020; Twum et al., 2021). However, there nearly 90% of economic growth and have the opportunity to contribute
remain opportunities for further contributions to the existing studies. Of to the sustainability of the economy through their products, services,
specific relevance to the present paper are two main research gaps. First, and business practices (Keskġn et al., 2010). The role of small and me­
the majority has examined the factors influencing eco-innovation dium enterprises (SMEs) in the least developing countries shows sig­
adoption in industrialized countries such as United States (Brunnerme­ nificance in moving towards such a sustainable economic development
ier and Cohen, 2003), UK (Lamond et al., 2010), European countries for a nation because SMEs have an enormous overall impact on the

* Corresponding author at: Center for Energy and Environmental Policy Research, Beijing Institute of Technology, Beijing 100081, China.
E-mail address: [email protected] (W. Chen).

https://doi.org/10.1016/j.techfore.2021.121146
Received 18 December 2020; Received in revised form 7 July 2021; Accepted 18 August 2021
Available online 31 August 2021
0040-1625/© 2021 Elsevier Inc. All rights reserved.
M.S. Han and W. Chen Technological Forecasting & Social Change 173 (2021) 121146

environment (Agan et al., 2013; Mitchell et al., 2020). More needs to be eco-innovation: organizational factors such as the firm’s competitive
understood about the determinants of SME’s eco-innovation adoption in advantage, the firm’s internal initiatives, and technological capabilities
such countries. To address these research gaps, this study investigates (Zailani et al., 2015; Forcadell et al., 2020); government interventions
the determinants of SMEs’ eco-innovation in one of the least developed including granting loans, policies and regulations (Horbach, 2016;
countries, namely, Myanmar. Huang et al., 2019); and market-related factors such as competitors’
In Myanmar, about 99.4% of enterprises are classified as SMEs: en­ practices, market needs, and customer interests (Long et al., 2017b;
terprises with 30 to 300 employees are classified as small, while enter­ Santos et al., 2019). In terms of consequences, eco-innovation has some
prises with 60 t0 600 employees are medium. They play a vital role in impact on organizations, including firm profitability (Kraus et al., 2020)
Myanmar’s economic development. On average, Myanmar’s SMEs ac­ and environmental performance (Singh et al., 2020), and social per­
count for 50-95% of employment and 30-53% of GDP in Southeast Asia formance (Wang et al., 2020). There are significant variations in the
(Charltons, 2020). SMEs are not only responsible for the country’s future determinants of eco-innovation, and its associations with firm perfor­
national economic development but also for environmental sustain­ mance are different among various countries (Fernández et al., 2021).
ability. Understanding the factors that influence SMEs’ adoption of Despite the growing body of eco-innovation literature in the context
eco-innovation may provide clues for Myanmar’s policymakers to help of industrialized countries such as UK and USA and developing countries
them most effectively support SMEs to achieve environmentally sus­ such as Brazil and China, very few of these studies have been done in the
tainable economic growth. context of least developed countries. Besides, the drivers of environ­
Drawing upon the theory of reasoned action, we developed a con­ mental behaviors of SMEs in such countries are relatively under-
ceptual framework to investigate the factors (i.e., customer demands, researched. Given the vital role of SMEs’ eco-innovation in the least
rivalry pressures, managerial environmental concerns, firm innovative developing countries in moving towards such a sustainable economic
capabilities, and environmental regulations) influencing the adoption of development, this study aims to uncover the factors influencing SMEs’
eco-innovation in Myanmar. We use survey data from 800 SMEs in eco-innovation in Myanmar.
Myanmar to test our research hypotheses via multiple regression
analysis. 2.2. Theory of reasoned action
This research has made some contributions. First, this study widens
the current eco-innovation literature by examining eco-innovation sta­ The current study is framed in the theory of reasoned action (TRA), a
tus in one of the least developing countries, namely, Myanmar. Second, commonly used socio-psychological theory. The basic premise of TRA is
extending the theory of reasoned action, this study investigates the that the perceptions and attitudes of an individual or an organization
factors that affect eco-innovation adoption at the SMEs level. Third, this influence their intentions and behaviors (Fishbein and Ajzen, 1975).
study provides policymakers, managers, and researchers with a better Based on this assumption, many studies have used TRA to explain the
understanding of the adoption of eco-innovation by SMEs in Myanmar, antecedents of a range of pro-environmental behaviors, such as
which can assist in the implementation of environmental policies and energy-saving (Lo et al., 2014), green product consumption (Paul et al.,
plans to reduce a company’s environmental impact and generate long- 2016), adoption of bicycle-sharing (Cai et al., 2019), and waste sorting
term environmental advantages. in China (Wang et al., 2021).
The remainder of this study is organized in the following manner. However, within the TRA framework, previous studies also claimed
The theoretical foundation and hypotheses are presented in Section 2. that apart from perceptions and attitudes, pro-environmental behaviors
The research approach we employed in the study is described in Section of an individual or organization are also partly influenced by external
3. The data analysis and results are presented in Section 4. The research contextual factors which are beyond the control of an individual or an
findings are discussed in Section 5. Section 6 summarizes the current organization (Sheppard et al., 1988; Groening et al., 2018). For instance,
study’s contributions and limitations, as well as future research Wang et al. (2018) found that households’ willingness to adopt recycling
directions. behavior was influenced by external factors such as perceived conditions
of recycling facilities, despite a positive attitude towards waste recy­
2. Theoretical background and hypotheses development cling. Furthermore, Cudjoe et al. (2020) found that perceived policy
effectiveness impacts households’ intention to adopt waste sorting.
2.1. Eco-innovation Hence, in line with the previous literature underlying this TRA as the
theoretical background, we investigate the determinants of SMEs’
Eco-innovation is defined as ``the production, assimilation or eco-innovation in Myanmar. Figure 1 shows our conceptual framework.
exploitation of a product, production process, service or management or
business methods that are novel to the firm (or an organization) and 2.3. Customer demands
which results, throughout its life cycle, in a reduction of environmental
risk, pollution and other negative impacts of resource use (including We define customer demands as the customers’ willingness to buy a
energy use) compared to relevant alternatives’’ (Kemp and Pearson, particular product or service in the market (Cai and Zhou, 2014).
2008, p. 7). The term ``eco-innovation’’ has been interchangeably used Meeting customer demands is key to the success of any company.
as ``green innovation, sustainable innovation, and environmental Companies should understand that customers’ preferences change with
innovation’’ (Hizarci-Payne et al., 2021, p. 1175). While eco-innovation time to promptly fulfill customer needs and achieve a competitive
is considered one of the subcategories of innovation, it mainly deals with advantage (Varadarajan, 2020). For example, as customers become
environmental problems by making environmental-oriented changes in environmentally conscious, they prefer environmentally friendly prod­
products, services, and marketing strategies (Mensah et al., 2019; Luo ucts and pay high prices for green products or services (Kautish and
et al., 2020; Ch’ng et al., 2021). Accordingly, eco-innovation is cate­ Sharma, 2020).
gorized into four types, namely process eco-innovation, product Previous studies in eco-innovation literature have discussed the
eco-innovation, organizational eco-innovation, and marketing critical role of consumer demands in firms’ adoption of eco-innovation
eco-innovation (e.g., Chen et al., 2020; Hizarci-Payne et al., 2021) (Liao and Tsai, 2019; Afshari et al., 2020; Ch’ng et al., 2021).
With the increasing emphasis on eco-innovation adoption, there is a Evidently, Fernández et al. (2021) showed that an increasing trend in
growing body of literature exploring the antecedents and consequences the consumer demand for environmentally friendly products influences
of eco-innovation (e.g., Rexhäuser and Rammer, 2014; Horbach, 2016; companies’ decision-making regarding environmental practices such as
Long et al., 2017a; Sanni, 2018; Forcadell et al., 2020). In terms of an­ the adoption of eco-innovation in the context of Chilean enterprises.
tecedents, previous studies have outlined the key determinants of Besides, Afshari et al. (2020) conducted a study in the additive

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M.S. Han and W. Chen Technological Forecasting & Social Change 173 (2021) 121146

Fig. 1. Conceptual framework.

manufacturing (AM) industry and found that it facilitates the firm’s respond to environmental problems (Qi et al., 2010). The extent of
adoption of eco-innovative methods for enhancing the sustainability of managerial environmental concerns can underlie firms’ motivation to
products, processes, and systems. In addition, Ch’ng et al. (2021) studied implement eco-innovation.
Malaysia’s technology industry and discovered that growing customer Several existing studies have demonstrated the significant role of
demand for green products drives businesses to embrace eco-innovative managerial environmental concerns as organizational support necessary
techniques. to achieve successful environmental innovation. For instance, the high
These previous findings represent for developing countries mostly. level of managerial environmental concerns is likely to trigger their
Our study attempts to investigate the influence of consumer demands on intent to adopt green innovation, which improves economic, environ­
SMEs’ adoption of eco-innovation practices for a least developing mental, and social performance (Long et al., 2019). According to Song
country like Myanmar. Hence, we hypothesized that et al. (2020), the higher the level of managerial concern for environ­
mental issues, the more management support for eco-innovation. Be­
Hypothesis 1. There is a positive relationship between customer demands
sides, companies are more willing to adopt an eco-innovation practices if
and SMEs’ eco-innovation.
their executives place a high value on the environment and its security
(Zhang et al., 2020). Furthermore, Sumrin et al., 2021 found that
2.4. Rivalry pressures managerial environmental responsibility is one of the primary elements
determining the application of eco-innovation methods for waste pre­
In order to gain market share, the company needs to adapt to the vention. Hence, we hypothesized that
efforts of its competitors. As companies face demands from various
stakeholders to engage in environmental protection, the efforts neces­ Hypothesis 3. There is a positive relationship between managerial envi­
sary to meet such demand have been transformed into competitive ri­ ronmental concerns and SMEs’ eco-innovation.
valry pressures while developing their innovation capabilities in
response to competitors’ actions (Shahzad et al., 2020). As rivals 2.6. Firm innovation capabilities
implement new environmental practices, companies in the same in­
dustry should examine their established environmental strategy, adapt Firm innovation capabilities are defined as the firm’s ability to up­
their environmental accountability, and enhance their environmental grade ideas, products, and services to meet higher innovation re­
performance (Geng et al., 2021). quirements (Fong and Chang, 2012). The extent of firm innovation
The academic literature on eco-innovation practices has provided capabilities determines the firm’s ability to adopt environmental prac­
extensive insights into the influence of external pressures such as rivalry tices in management and operational processes (Valdez-Juárez and
on eco-innovation in the emerging market for green products. Evidently, Castillo-Vergara, 2021). Empirical evidence has shown that the extent of
Wang et al. (2020) discovered that competitive pressures as one of the firm innovation capabilities plays an essential role in gaining competi­
drivers of eco-innovation in emerging countries in the Chinese hotel tive advantage or core competencies, but it also influences the firm’s
sector. Also, Mercado-Caruso et al. (2020) investigated how institutional eco-innovation implementation (e.g., Hojnik and Ruzzier, 2016; Sunni,
elements such as competitive pressures play a crucial role in designing 2018; Bhat and Momaya, 2020). Notably, Wu et al. (2020) mentioned
an eco-innovation strategy in the context of the European Commission. that firm-level innovative technological capability greatly contributes to
Furthermore, Cornejo-Cañamares et al. (2021) explored whether NEV-related innovations in China’s energy vehicle market. Using a
competitiveness in Spanish manufacturing SMEs leads to adopting sample of 265 manufacturing enterprises from China’s Pearl River Delta
eco-innovation practices. In our study, we hypothesized that region, Chen et al. (2020) also examined the association between
Hypothesis 2. There is a positive relationship between rivalry pressures organizational innovation and technological innovation capabilities, as
and SMEs’ eco-innovation. well as their impact on firm performance. As well, Andersson et al.
(2020) found a link between SMEs’ eco-innovation performance and
their capability to innovate products, processes, services, and business
2.5. Managerial environmental concerns
models. Valdez-Juárez and Castillo-Vergara (2021) showed that the
extent of innovative technological capabilities has a substantial impact
Managerial environmental concerns can be defined as the degree of
on corporate performance through open innovation and eco-innovation
concern of a firm’s management towards the environment and envi­
practices. Consider all these correlates; then we hypothesized that
ronmental innovation strategy (Long et al., 2017a). Managerial envi­
ronmental concerns relate to the firm’s scope and speed initiatives to Hypothesis 4. There is a positive relationship between firm innovation

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M.S. Han and W. Chen Technological Forecasting & Social Change 173 (2021) 121146

capabilities and SMEs’ eco-innovation. 1000-kyat (i.e., kyat is the Myanmar currency) mobile phone bill top-up
card. We asked respondents to fill in the information regarding the
2.7. Environmental regulations personal and firm characteristics and rate the independent variables (i.
e., customer demands, rivalry pressures, managerial environmental
Environmental regulation refers to the enforcement of restrictions or concerns, firm innovation capabilities, environmental regulations), and
obligations on individuals, companies, and other organizations to avoid dependent variable, eco-innovation adoption at their companies. After
environmental degradation or restore deteriorated ecosystems (Sanni, three months of data collection period, a total of 1,000 responses was
2018). Environmental regulations might include strict but achievable returned. The response rate was 100 percent. After screening missing
expectations or adequate timeframes for implementing innovative so­ data and errors in filling in the questionnaires, we were left with 800
lutions specified to the circumstances of a nation (Leenders and Chan­ responses, which is a sufficient sample size for this study.
dra, 2013; Liu et al., 2020).
Previous studies have investigated the relationships between envi­ 3.3. Measures
ronmental regulations and eco-innovation practices. For instance, ac­
cording to Liao and Tsia (2019), environmental monitoring policies and We adapted previously published measurement items for the vari­
regulations may force the business to implement green innovation ini­ ables used in our study. Independent and dependent variables were
tiatives. Wang et al. (2020) also looked into the antecedents of hotel measured on 5-point Likert scales (1= ``strongly disagree’’, 5 =
eco-innovation and discovered that governmental regulatory pressure is ``strongly agree’’). Independent variables: customer demands were
one of the most important external drivers of eco-innovation in the measured using three items from Agan et al. (2013). Sample items are
Chinese hotel business. Furthermore, Frigon et al. (2020) conducted a ``Environmental issues are important to our customers’’; ``Concerning
study in the context of the Canadian wine industry and discovered that environmental issues, our customers make requirements’’. Rivalry
environmental regulatory pressures encourage enterprises to foster pressures were measured using three items from Long et al. (2017b). The
environmental innovation by investing in non-polluting industries. sample items included ``The competitors of our company implement
These earlier studies, on the other hand, were conducted in rapidly environmentally friendly production technology’’; ``The competitors of
emerging economies. In this study, we investigate the role of environ­ our company implement Environmental Management System’’. Mana­
mental regulations in the context of a least developed country, namely gerial environmental concerns were measured using four items from
Myanmar, assuming it positively impacts the SMEs’ adoption of Song et al. (2020). The sample items included: ``Environmental inno­
eco-innovation. Accordingly, we hypothesized that vation is an important component of the company’s environmental
management strategy’’; ``Environmental innovation is necessary to
Hypothesis 5. There is a positive relationship between environmental attain high levels of environmental performance’’. Firm innovative ca­
regulations and SMEs’ eco-innovation. pabilities were measured using three items from Fong and Chang
(2012). The sample items are ``Our company frequently tests with new
3. Research methodology environmentally friendly ideas’’; ``Our company seeks more environ­
mental ways to do things’’. Environmental regulations were measured
3.1. Research context using four items from Agan et al. (2013). The sample items include
``Environmental regulations can impact our company’’; ``Environ­
This study sought to investigate the factors influencing SMEs ’ green mental regulations encourage our company to invest in the environ­
innovation practices in Myanmar. For a variety of reasons, we chose mental efforts’’. Adoption of eco-innovation, dependent variables, was
Myanmar to study. Myanmar, strategically located between India and measured using four items from Chiou et al. (2011). The sample items
China and rich in natural resources, presents a significant environmental are ``We useless or less harmful (using environmentally friendly) ma­
challenge to producing these resources. Myanmar’s businesses are under terials during the production of our products’’; ``We use eco-labeling’’.
pressure to cope with climate change and save energy and natural Control variables: According to existing literature (e.g., Zailani et al.,
resource costs because of shifts in the global environment (Kapteyn and 2015; Faria and Andersen, 2017), some characteristics of the re­
Wah, 2016). The government of Myanmar focuses on companies that spondents and the firms may influence the firm’s intention of
help achieve the goals of sustainable growth. However, Myanmar has eco-innovation. Therefore, we include some individual and firm char­
not yet embarked on national projects specifically linked to SME’s acteristics as control variables, namely gender, age, educational level,
eco-innovation or established unique national eco-innovation regula­ years of experience, firm size (number of employees), firm operational
tions and economic frameworks. As eco-innovation is regarded as a key age, and industry type.
strategy for achieving sustainable growth of every business, the study of
SME’s adoption of eco-innovation in Myanmar would fill the remaining 4. Data analysis and results
research gaps in the literature and benefits non-governmental organi­
zations that are initiating to reduce environmental impacts in the 4.1. Profile of respondents
context of least developing countries.
The characteristics of the respondents are presented in Table 1.
3.2. Sample and data collection Among 800 SMEs general managers who responded to our question­
naires, 69.3 % of the respondents were male, and 30.7 % were female.
The target population was registered SMEs in Myanmar operating in The average age of the respondents falls in the category between the
all industrial sectors. We were provided with the list of SMEs’ email ages of 30 and 50. 67 % of the respondents reported a bachelor degree.
addresses by one of the Management Training Institutes in Myanmar. More than 50 % of the respondents have working experience from 5 to
Before formal data collection, a pre-test was conducted with 20 random 10 years. The data also show that 58.3 % of the participating firms have
managers with the aid of one of the Management training institutes in less than 50 employees and more than 10 employees. 40.24 % of these
Myanmar. We asked them to complete our trial version of the ques­ firms have been operational for more than 5 years in different industries.
tionnaires to ensure that the questionnaire is appropriate to use. Based
on feedback from the pre-test, we made a few slight improvements to the 4.2. Preliminary analyses
final version of the survey method.
After finalizing the questionnaires, we distributed the questionnaires Because we are working with self-reported data from a single source,
to 1,000 randomly selected emails, along with the serial numbers for we must first address the issue of common method variance (CMV)

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M.S. Han and W. Chen Technological Forecasting & Social Change 173 (2021) 121146

Table 1 mean square error of approximation (RMSEA) (i.e., the residual in the
Sample characteristics (N = 800). model) is 0.046. The range of RMSEA values is 0 to 1, with a lower
Variables Frequency (%) RMSEA value suggesting a better model fit.
We used composite reliability (C.R.) and Chronbach’s alpha (i.e.,
Gender Male 69.3
Female 30.7 internal consistency) to confirm the construct reliability of measuring
Age <30 years old 21.3 items, as recommended by Fornell and Larcker (1981). To demonstrate
30 – 50 years 45.3 the convergent validity of each construct, we looked at factor loadings (i.
> 50 years old 33.4 e., correlation coefficients between observed variables and latent com­
Education High school 10.3
Bachelor degree 67.0
mon factors) and average variance extracted (AVE) (i.e., the amount of
Master degree and above 22.7 variance captured by a construct concerning the amount of variance due
Working experience < 5 years 17.8 to measurement error) (Bagozzi and Yi, 1988). Composite reliability,
5 - 10 years 56.7 Chronbach’s alpha, factor loading, and AVE have recommended cutoff
11 - 15 years 14.2
values of 0.60 (Bagozzi and Yi, 1988), 0.60 (Hulin et al., 2001), 0.65
More than 15 years 11.3
Firm size < 10 people 41.7 (Hair et al., 2006), and 0.5 (Raines-Eudy, 2000) respectively. All scale
10 - 50 people 58.3 items and standardized loadings and reliability alphas, and average
Firm age < 3 years 25.11 variance extracted (AVE) data are listed in Table 2.
3 – 5 years 34.65 Because all factor loadings above 0.70 and the average variance
More than 5 years 40.24
Industrial Type Textile 14.6
extracted (AVE) exceeded 0.50, the data indicates that each construct
Food and beverage 25.4 has convergent validity. According to Fornell and Larker (1981), the
Agriculture 25.1 scales also had discriminant validity: the correlation between each pair
Minerals and mining 18.8 of constructs was less than the square root of the AVE for each related
Industrial machinery 12.2
construct. The means, standard deviations, and correlation coefficients
Miscellaneous other 0.9
for the study variables in this research are shown in Table 3.

(Meade et al., 2007). Otherwise, CMV could lead to erroneous conclu­

4.3. Hypotheses testing
sions by the researchers (Podsakoff et al., 2003). As a result, we used
Harman’s single factor test to reduce the risk of CMV (Craighead et al.,
We performed bivariate correlation and multiple regression analysis
2011). The findings revealed that a single factor contributes to 29.85
in SPSS 23.0 to test the proposed hypotheses: the relationships between
percent of the variance between the variables, which is below the CMV
customer demands, rivalry pressures, managerial environmental con­
threshold of 50%. We assert that CMV is not a concern in the current
cerns, environmental regulations, firm innovation capabilities, and
study.
SMEs’ eco-innovation.
We performed confirmatory factor analysis to show the acceptable fit
As shown in Table 4, Model 1 includes control variables: none of the
of our conceptual model. According to the cutoff values for fit indexes in
control variables are associated with the dependent variables except
the confirmatory factor analysis (Hu and Bentler, 1999), the goodness of
firm operational age. Firm operational age is positively and significantly
fit (i.e., how much the expected and observed covariance matrices
related to Myanmar SMEs ’ adoption of eco-innovation. Model 2 in­
differ) (GFI) is 0.89. The goodness of fit (GFI) measures close to 0 suggest
cludes the exploratory variables. The results of multiple regression
that the expected and observed covariance matrices are almost identical.
analysis in Model 2 (Table 4) indicate that there is a significant corre­
Normalized fitness index (NFI) (i.e., the disparity between the hypoth­
lation between each of the proposed factors: customer demands (H1),
esized model’s chi-squared value and the null model’s chi-squared
rivalry pressures (H2), managerial environmental concerns (H3), firm
value) is 0.95. NFI values should be in the range of 0 to 1, with a cut­
innovation capabilities (H4), and environmental regulations (H5) and
off of.95 or higher indicating a strong model fit. Comparative fit index
SMEs’ eco-innovation in Myanmar. Results show that the influence of
(CFI) (i.e., the discrepancy function adjusted for sample size) is 0.93. CFI
customer demands on SMEs’ eco-innovation in Myanmar is positive and
goes from 0 to 1, with a higher value suggesting a better model fit. Root
significant (b = 0.196, p < 0.01). Rivalry pressures have significant

Table 2
Factor loadings, validity, and reliability tests (N = 800).
Likert-scale construct Number of items Cronbach’s alpha Standardized factor loadings Composite reliability AVE

Customer demands 3 0.755 0.786 0.835 0.559

0.854
0.739
Rivalry pressures 3 0.754 0.751 0.832 0.624
0.761
0.855
Managerial environmental concerns 4 0.821 0.788 0.872 0.632
0.767
0.885
0.732
Firm innovation capabilities 3 0.856 0.817 0.809 0.587
0.698
0.779
Environmental regulations 4 0.775 0.833 0.881 0.650
0.856
0.766
0.767
Adoption of eco-innovation 4 0.754 0.761 0.872 0.631
0.768
0.791
0.856

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Table 3
Descriptive statistics, correlations, and discriminant validity statistics.
No. Variables M SD 1 2 3 4 5 6

1 Adoption of eco-innovation 4.012 0.214 (0.794)

2 Customer demands 3.926 0.239 0.228** (0.747)
3 Rivalry pressures 2.782 0.153 0.176 0.065 (0.789)
4 Managerial environmental concerns 3.542 0.228 0.105* 0.021 0.005 (0.794)
5 Firm innovation capabilities 2.872 0.452 0.121 0.280 0.109 0.102 (0.806)
6 Environmental regulations 3.875 0.231 0.197** 0.097 0.094 0.078 0.098 (0.766)

Note: *p < .05, **p < .01 (N = 880); squared correlation of average variance extracted are in the diagonal row. (N = 800).

(2016) showed that customers’ willingness to purchase green products

Table 4
would encourage the firms to stick to green production processes.
Results of multiple regression analysis.
It is also shown that environmental regulations positively and
Variables Model 1 Model 2 significantly affect SMEs’ eco-innovation in Myanmar. In alignment
Dependent variable with the previous literature (e.g., Fernández et al., 2021), this study
SMEs’ adoption of eco-innovation shows that the strict enforcement of environmental regulations is
Independent variables
required to be one of the main predictors of SMEs’ eco-innovation.
Customer demands 0.196**(0.057)
Rivalry pressures 0.149*(0.064) The fourth determinant is the firm’s competition with others (i.e.,
Managerial environmental concerns 0.113*(0.075) rivalry pressures). The study indicates that rivalry pressures have a
Firm innovation capabilities 0.254***(0.065) positive impact on SMEs’ eco-innovation in Myanmar. This finding adds
Environmental regulations 0.185**(0.055) another evidence to the existing studies regarding how competitors are
Control variables
critical to SMEs’ adoption of eco-innovation.
Gender − 0.033(0.032) − 0.029(0.023)
Age − 0.051(0.024) − 0.054(0.029) In addition, this study shows that managerial environmental concern
Education 0.012(0.053) 0.036(0.047) also positively influences SMEs’ eco-innovation in Myanmar, although it
Experience 0.043(0.066) 0.036(0.047) has the least significant. This result supports the previous studies that
Firm size 0.096(0.035) 0.095(0.034)
repeatedly mentioned that managerial concern for environmental issues
Firm age 0.105*(0.061) 0.103*(0.057)
Industrial type 0.066(0.032) 0.061(0.033)
is one of the influencing factors in the firm’s decision to adopt eco-
R-square 0.36** 0.47** innovation processes (e.g., Bossle et al., 2016; Díaz-García et al.,
2015). Summarized, this study implies that all of these above factors
Note: *p < .05, **p < .01, ***p < .001 (N = 800).
should be considered in evaluating SMEs’ adoption of eco-innovation in
Myanmar.
positive impact on SMEs’ eco-innovation in Myanmar (b = 0.149, p <
0.05). The extent of managerial environmental concerns is positively 6. Conclusion and implications
and significantly related to SMEs’ eco-innovation adoption in Myanmar
(b = 0.113, p < 0.05). Furthermore, there is a positive relationship be­ The role of SMEs’ adoption of eco-innovation in the least developing
tween firm innovation capabilities and SMEs’ eco-innovation in
countries shows significance in moving towards such a sustainable
Myanmar (b = 0.254, p < 0.001). Additionally, environmental regula­
economic development for a nation because SMEs have an enormous
tions also have significant positive effect on SMEs’ eco-innovation in
overall impact on the environment (Agan et al., 2013). More needs to be
Myanmar (b = 0.185, p < 0.01). Therefore, the results of the data
understood about the determinants of SME’s eco-innovation adoption in
analysis supported all proposed hypotheses in the study.
such countries. This study investigates the determinants of SMEs’
All variables have a considerable positive influence on SMEs’ eco-
eco-innovation in one of the least developed countries, namely,
innovation in Myanmar, according to these results. We compare the
Myanmar.
standardized regression coefficients for each of the determinants and
This research has made academic contributions to the literature.
find that firm innovation capabilities (b = 0.254) has the greatest impact
While many studies on eco-innovation adoption in highly developed
on SMEs’ eco-innovation in Myanmar, followed by customer demands
countries, this study widens the context of eco-innovation literature by
(b = 0.196), environmental regulations (b = 0.185), rivalry pressures (b
better understanding eco-innovation in one of the least developing
= 0.149), and managerial environmental concern (b = 0.113).
countries, namely, Myanmar. Besides, this current study enriches the
eco-innovation literature by investigating the factors driving eco-
5. Discussions
innovation at the SME level. Amongst five determinants, the extent of
firm innovation capabilities is the most significant predictor of SMEs’
This study predicts the factors that influence SMEs’ eco-innovation in
eco-innovation in Myanmar, followed by customer demands, environ­
Myanmar. The results find that all of the independent variables signifi­
mental regulations, rivalry pressures, and managerial environmental
cantly impact SMEs’ eco-innovation in Myanmar. Among five de­
concerns.
terminants, firm innovation capabilities’ positive influence is the most
In practice, this study also provides some suggestions for the con­
significant predictor of SMEs’ eco-innovation in Myanmar, followed by
cerned government, SME owners, and managers. Our study finds that for
customer demands, environmental regulations, rivalry pressures, and a least developed country like Myanmar, SMEs with abundant innova­
managerial environmental concern.
tion capabilities are more likely to engage in eco-innovation activities as
The result shows a positive relationship between firm innovation firms that are more creative with environmental management and
capabilities and SMEs’ adoption of eco-innovation. This study sheds
operational processes could contribute more to environmental protec­
light on how firms that can experiment with new ideas regarding envi­ tion. We suggest that SMEs should intensify their innovation capacity to
ronmental protection are more likely to adopt eco-innovation (Cai and
be more efficient and competitive while adopting sustainable business
Zhou, 2014; Cai and Li, 2018). models. SMEs should develop more collaboration with research centers
The findings show that customer demands positively and signifi­
and institutes for the advancement of eco-innovative practices. SMEs
cantly influence SMEs’ eco-innovation in Myanmar. This finding is should seek more support from the national government for the devel­
found to be consistent with the previous studies. For example, Paul et al.
opment of eco-innovation projects. Government should provide training

6
M.S. Han and W. Chen Technological Forecasting & Social Change 173 (2021) 121146

programs for members of SMEs to improve their human capabilities. studies or experimental methods, should be used to confirm our find­
Second, SMEs in Myanmar are eager to provide environmentally ings. Second, this study focuses on eco-innovation in general. Future
friendly products or services when there are high customer demands. studies could contribute by differentiating between different types of
Policymakers should promote customer awareness for environmental eco-innovation. Third, our study has included the industry type as one of
issues to be encouraged to adopt more environmentally friendly prod­ the control variables in our multiple regression analysis. However, we
ucts. SMEs managers should pay attention to this imperative factor when suggest a subgroup analysis of the eco-innovations by industry types as a
formulating their product innovation strategies. Third, fierce competi­ future research direction. Furthermore, although this study represents
tion in the green market development will motivate SMEs to adopt eco- useful facts for Myanmar, the selection of location might limit the
innovation to survive in the long term (Yalabik and Fairchild, 2011; generalizability of the findings. Hence, replication of this study should
Yang et al., 2015). The environmental activities of the competitors drive be done in other countries to widen the generalization of the current
SMEs to be more environmentally oriented and maintain their compet­ study.
itive advantage in a particular industry. The policymakers should ensure In summary, our study delivers potential benefits to Myanmar na­
that there are fair and transparent competitions among the SMEs tional government, business owners and managers in Myanmar SME
regarding adopting eco-innovation. Fourth, the government should sectors, and researchers interested in understanding the status of eco-
leverage environmental policies to strengthen the efforts of SMEs’ innovation in the context of least developing countries.
eco-innovation. This study suggests that environmental regulations
should be regarded as policy interventions since they will effectively Funding
impact the SEMs’ engagement in eco-innovation practices. Last but not
least, varied with the extent of managerial environmental concerns, the This research was funded by the China Postdoctoral Science Foun­
adoption of eco-innovation will lessen the negative consequences of dation (2020M680400) and the National Natural Science Foundation of
environmental issues and bring more safety to the environment. Hence, China (No. 72004011)
policymakers should create more campaigns or activities to promote
management’s level of environmental awareness and to enhance their
understanding of environmental safety measures. Declaration of Competing Interest
Despite the fact that our study provides significant contributions, it
does have several limitations that can be used as a guide for future The authors declare that they have no known competing financial
research. To begin, because this study used cross-sectional data from a interests or personal relationships that could have appeared to influence
questionnaire survey method, many additional methods, such as field the work reported in this paper.

Appendix 1

Measurement items

Constructs Likert-scale items

Customer demand Environment is a critical issue for our customers.

Our customers have clear demands regarding environmental issues.
Customer demands motivate us in our environmental efforts.
Rivalry pressure The competitors of our company adopt clean production technology.
The competitors of our company adopt Environmental Management System.
The competitors of our company obtain environmental authentication of ISO 14001.
Managerial environmental concern Environmental innovation is an important component of the firm’s environmental management strategy.
Most environmental innovations are worthwhile.
Environmental innovation is an effective environmental management strategy.
Environmental innovation is necessary to achieve high levels of environmental performance.
Firm innovative capabilities Our company frequently experiments with new green ideas.
Our company seeks more environmental ways to do things.
Our company is creative with green efforts regarding management and operational processes.
Environmental regulations Environmental regulations have impact on my business.
Environmental regulations motivate us in our environmental efforts.
We closely follow environmental regulations.
Environmental regulations are enforced without any hesitation.
Eco-innovation adoption Our firm uses less or non-polluting/toxic materials (Using environmentally friendly material) during product design.
Our firm engages in recovery of company’s end-of-life products and recycling.
Our firm uses eco-labelling.
Our firm improves and designs environmentally friendly packaging (e.g. less paper and plastic material used) for existing and new products.

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Myat Su Han (Ph.D.) is a lecturer from the College of Business Administration at the
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Capital University of Economics and Business, China. Her current research predominantly
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lies in pro-and anti-social behaviors and pro-environmental behaviors. She has published
behavior in household waste sorting in China: the moderating effect of knowledge,
papers in Energy Policy, Resources, Conservation and Recycling, Science of the Total
personal involvement, and moral responsibility. Environ. Dev. Sustain. 23 (5),
Environment, Journal of Cleaner Production, Sustainable Production and Consumption,
7230–7250.
amongst others.
Wang, Z., Dong, X., Yin, J., 2018. Antecedents of urban residents’ separate collection
intentions for household solid waste and their willingness to pay: evidence from
China. J. Clean. Prod. 173, 256–264. Weiming Chen (Ph.D.) (Corresponding author) is an associate professor from the Centre
Wu, Y., Gu, F., Ji, Y., Guo, J., Fan, Y., 2020. Technological capability, eco-innovation of Energy and Environmental Policy Research at the School of Management and Economics
performance, and cooperative R&D strategy in new energy vehicle industry: of Beijing Institute of Technology, China. His research interests include energy, resources
evidence from listed companies in China. J. Clean. Prod. 261, 121157. and environmental economics, climate change and low-carbon transition, environmen­
Yalabik, B., Fairchild, R.J., 2011. Customer, regulatory, and competitive pressure as tally extended input-output analysis. His research work has been published in many in­
drivers of environmental innovation. Int. J. Prod. Econ. 131 (2), 519–527. ternational peer-reviewed journals, including Applied Energy, Energy, Science of the Total
Yang, J., Zhang, F., Jiang, X., Sun, W., 2015. Strategic flexibility, green management, and Environment, Resources, Conservation and Recycling. He can be contacted at chenwei­
firm competitiveness in an emerging economy. Technol. Forecasting Social Change [email protected]
101, 347–356.