Green innovation and knowledge: The role of size

Abstract This paper reports research on relationship between firm's knowledge sourcing strategy and green innovation. The data are taken from Spanish Technological Innovation Panel survey during 2007–2011. The study contributed to the literature by focusing on the moderating role of firm size on the relationship between knowledge sources and green innovations. Results from over 5,000 firms indicate a shift in the focus from internal knowledge to external knowledge when developing green innovations as firms grow in size. Despite benefits from broad knowledge search on green innovations, the relationship has an inverted U shape. The diminishing returns of knowledge breadth on green innovations are present for smaller firms and disappearing as firms get larger. Government policies promoting more coordination and knowledge complementarity between private and public sector will help to influence more knowledge transfer, ensuring a more sustainable and green economy.