Embedding environmental innovation in local production systems: SME strategies,networking and industrial relations: evidence on innovation drivers in industrial districts

Technological innovation is a key factor for achieving better environmental performances. Its role is even more relevant in local productions system, where innovation density, knowledge spillovers and externalities are concentrated in a circumscribed territory. The paper exploits new data for a sample of manufacturing firms in Northern Italy. New evidence is provided by testing a set of hypotheses, concerning primarily the role of environmental‐devoted R&D, networking activities, quality/nature of industrial relations. The role played by environmental policy pressure, structural firm features and past firm performances is also investigated to account for more exogenous forces. We show that structural characteristics of the firm appear to matter less than R&D, induced policy costs and innovative‐oriented industrial relations. Environmental auditing schemes also show some relevant correlation to innovation adoptions. R&D efforts appear to be associated to networking activities, which substitute for size‐related economies of scale. Overall, endogenous factors driven by firm strategy or local idiosyncratic features matter more than exogenous and structural firm factors.