Economic incentives and small firms: Does it pay to be green?

This study investigates the relationships among green performance, financial performance and green economic incentives for small firms. Surprisingly little research exists on the environment and small firms. The traditional view of the corporation argues that improving the environment hurts firm performance. Recent green-oriented research argues that this is not the case for larger firms. This study found a positive relationship between green and financial performance. That is, those small firms that perform better environmentally are also the most successful financially. This study also investigates green economic incentives that encourage green practice. The results indicate that the positive relationship between green and financial performance is greater when few green economic incentives exist for small firms. Although not hypothesized, the study found a positive relationship between green economic incentives and small firm performance, leading to a recommendation that small firms should consider encouraging the government to adopt green economic incentives. The paper also offers potential avenues for future research. (c) 2005 Elsevier Inc. All rights reserved.