Impact of market reach on the link between green initiatives and financial performance for Belgian SMEs

Abstract

This research investigates the intricate relationship between market reach, green initiatives, and financial performance among Belgian SMEs, with a focus on turnover growth as a key indicator of financial success. The study leverages data from the "Flash Eurobarometer FL498: SMEs resource efficiency and green markets" dataset, employing ordinal probit regression to analyse the influence of market reach and green products on the financial outcomes of these firms.

The study utilized a quantitative approach, specifically ordinal probit regression, to examine the relationship between green initiatives, market reach, and financial performance. The dependent variable, turnover growth, was measured in three categories: "Decrease," "No Change," and "Increase." Independent variables included the presence of green products and services, the proportion of turnover generated from these products, and the geographical scope of the firm's market reach. Control variables such as sector and firm size were also incorporated to account for industry-specific and scale-related factors.

The results of the study reveal that the presence of green products and services within a firm's offerings does not have a statistically significant direct impact on turnover growth. While market reach, particularly the expansion beyond national borders, was anticipated to play a significant role in enhancing the financial benefits of green initiatives, the results indicate that its impact on turnover growth is not as straightforward as expected. The data suggests a complex interplay between market reach and green initiatives, where broader market exposure does not necessarily translate into better financial performance within the short term.