Journal of Economics, Management and Trade

Aims: The study assessed the effect of external research and development (R&D) on firms’ green process innovative performance and examined the moderating role of knowledge transformation in Ghana.

Study Design: A quantitative explanatory research design was employed.

Place and Duration of Study: The study was conducted in Ghana using the 2013 Ghana Enterprise Survey and the 2014 Ghana Innovation Follow-up Survey. The Innovation Follow-up Survey was conducted between January and August 2014.

Methodology: The study combined the 2013 Ghana Enterprise Survey and 2014 Ghana Innovation Follow-up Survey datasets. The analysis comprised 549 firms after data management from an original sample of 720 firms. External R&D was used as the measure of external knowledge acquisition, while knowledge transformation captured firms’ ability to integrate acquired knowledge with existing knowledge. Green process innovative performance was measured as a binary outcome indicating whether firms introduced environmentally beneficial production processes. Binary logistic regression models with robust standard errors were estimated to assess the direct and moderating effects, controlling for firm age, sector, size, and international recognition.

Results: External R&D had a positive but statistically insignificant direct effect on green process innovative performance (β = 1.0353, robust SE = 0.7427, marginal effect = 0.0726, p = .163). In contrast, knowledge transformation had a positive and statistically significant effect on green process innovative performance (β = 1.5576, robust SE = 0.3169, marginal effect = 0.1092, p < .001). The interaction between external R&D and knowledge transformation was positive and statistically significant (β = 1.6975, robust SE = 0.7195, marginal effect = 0.1448, p = .018), indicating that the association between external R&D and green process innovative performance strengthens as firms’ knowledge transformation capacity increases. Firm age was positively and significantly associated with green process innovative performance in both models (p = .001 and p < .001). Medium-sized firms did not differ significantly from small firms, while the negative coefficients for large-sized firms were statistically insignificant based on their reported coefficients and standard errors. In the moderation model, service-sector firms had a positive and statistically significant association with green process innovative performance relative to manufacturing firms (β = 0.7429, p = .015). Both models were statistically significant overall.

Conclusion: External R&D alone does not significantly enhance firms’ green process innovative performance. However, its positive association with green process innovation becomes stronger when firms possess greater knowledge transformation capacity. The findings therefore suggest that the value of external R&D depends partly on firms’ ability to integrate, adapt, and apply externally acquired knowledge. Strengthening internal knowledge transformation capabilities alongside external R&D may enable firms to translate externally acquired knowledge more effectively into environmentally sustainable production processes.