Green Innovation and Export Performance of Manufacturing SMEs: The Mediating Role of Environmental Productivity

Small and medium-sized manufacturers are asked to cut their environmental footprint and, at the same time, to win customers abroad. This paper asks whether the two goals reinforce each other, and through which mechanism. We argue that green innovation raises a firm’s environmental productivity (EP), the value it creates per unit of environmental pressure, and that higher EP in turn strengthens export performance by lowering cost, easing compliance with buyer and import requirements, supporting credibility in supply-chain audits, and improving quality. Drawing on the natural-resource-based view, the Porter hypothesis, and heterogeneous-firm trade theory, the paper develops six hypotheses: a path from green innovation to EP (H1), from EP to exports (H2), a direct path (H3), partial mediation through EP (H4), a stronger first path where absorptive capacity is high (H5), and a stronger second path in stringent destination markets (H6). We define EP formally, link it to a directional distance function, and set out a measurement and estimation design based on bootstrapped (moderated) mediation. Because no firm-level dataset is analysed, the empirical section is a Monte Carlo illustration of 420 simulated SMEs generated from assumed parameters; it shows how the model is estimated, interpreted, stress-tested with a 72-specification curve, and reported, and it must not be read as evidence about real firms. The illustration recovers an indirect effect of 0.139 (95% CI 0.094–0.190), about 55% of the total effect, and a conditional indirect effect that grows with absorptive capacity. The paper closes with managerial and policy implications and a research agenda for Bangladesh and other
export-oriented emerging economies.