Analyzing How European Startups Generate Eco-Processes and Eco-Products: Eco-Innovation Implementation, Financial Resources, and Patents

Abstract

Despite the pivotal role of European startups in addressing pressing environmental concerns, the current literature has neglected the dynamic factors that influence startups’ decision-making to implement eco-innovation. This study aims to bridge this gap by exploring the impact of eco-innovation implementation on eco-processes and eco-products, considering financial resources and patents as mediators. An integrative framework was proposed, focusing on customer demand, expected benefits, and the description of green innovation as the main dimensions influencing European startups’ decisions to implement green innovation. Furthermore, a questionnaire was distributed to European startups to cover all feasible sectors, resulting in 114 valid responses. The methodology used SmartPLS for descriptive statistics and structural equation modeling. The results showed that financial resources mediate the relationship between eco-innovation implementation and eco-processes, while patents do not mediate either relationship. Eco-innovation implementation also directly influences eco-products. In conclusion, financial resources are essential for advancing eco-process improvements in European startups, emphasizing the necessity for targeted financial support mechanisms to stimulate green innovation. Also, the patents’ absence as a mediator suggests a focus on immediate operational benefits over intellectual property. This paper’s implications can inform strategic decisions for policymakers, investors, and entrepreneurs to promote a more sustainable entrepreneurial landscape.

1. Introduction

Escalating environmental concerns necessitate a paradigm shift towards sustainable practices, with eco-innovation emerging as a critical response to this global challenge. The core of eco-innovation is composed of creative improvements to evolved or novel paths to generate products and services that serve environments facing probable harm. Such a pattern of innovation correlated to the environment can lead to cleaner technologies and more sustainable practices [1,2]. Eco-processes refer to the methods or systems utilized in manufacturing and production that are eco-friendly [3]. For instance, Hydraloop, based in Leeuwarden, Netherlands, embraces a water purification process and uses renewable energy to power machines, reducing environmental harm [4]. Eco-products, on the other hand, are commodities designed with environmental considerations in mind [5]. They often utilize sustainable materials, reduce waste, or lower carbon emissions footprints more than their conventional counterparts. Examples include reusable shopping bags, electric cars, and organic food, to name a few [6]. Recognizing the increasing significance of sustainability, firms have embarked on a journey of green innovation. Instead of relying on traditional resource-intensive materials, environmentally conscious firms are shifting to green processing and production by using recycled materials, such as old water bottles and rubber tires in shoe production [7]. This innovative approach not only reduces firms’ reliance on new resources but also helps to divert plastic waste from landfills by repurposing it to make useful products. It is a win–win situation for the company and the environment and a prime example of how eco-innovation can lead to the implementation and creation of eco-processes and eco-products [8].

Although startups are typically founded with specific long- and short-term objectives, the competitive market faces challenges that require well-developed structures to counter threats from peer players [7]. Startups use eco-innovation as a strategic approach not only to promote sustainability but also to enrich performance in an environment of ongoing technological refinement [9,10]. To implement eco-innovation effectively, business owners must evaluate the level of interest in green innovation adoption by testing both external and internal factors that influence this approach [11]. Policymakers, business owners, and investors try to promote and support eco-innovation initiatives that prioritize inclusive research and diverse perspectives [12]. Finally, governments that aim to support sustainable startups so that they can thrive should identify and promote factors that incentivize green entrepreneurship through innovation and the acceptance of new technology.

Eco-innovation strives to advance novel products or services to minimize negative environmental effects [13]. Although substantial research recognizes the significance of eco-innovation, the specialized literature shows a crucial gap in knowledge on the level of green innovation adoption in startups, especially on eco-processes and eco-products. This gap is due to dependence on research that focuses only on specific countries or a single industrial environment [14,15]. For example, several studies have analyzed aspects of green innovation in startups. Serio et al. [16] explored the survival rates of green and non-green startups in Italy to determine the key traits associated with innovation in these firms. Robinson and Stubberud [17] investigated the differences in green practices implemented in SMEs and large firms in Germany. Ball and Kittler [18] analyzed the insights of green entrepreneurs in the British, French, and German energy sectors into the importance and efficiency of support mechanisms for minimizing the failures of the environmental market. The very few research contributions that examine the interaction between startups and green innovation stress the need to explore startups’ potential to shape sustainable futures. This paper thus proposes a new, comprehensive analytical framework to investigate how European startups implement eco-innovation through eco-processes and eco-products. The framework encompasses the mediating roles of financial resources and patents, considering diversification via various sectors and industries. This study analyzes a set of critical variables in detail to enrich the relevant literature on practice, open new horizons in this field, and investigate the various factors and reasons that motivate startups to adopt sustainability in Europe. Finally, this study aims to provide evidence-based recommendations for policymakers, stakeholders, and entrepreneurs in the startup ecosystem.

To achieve these goals, this paper poses three research questions to advance the understanding of the dynamics of eco-innovation in European startups. First, does eco-innovation implementation affect European startups’ adoption of eco-processes and eco-products? This question explores the extent to which European startups adopt eco-innovation and the influence of such innovation on their business practices, specifically in terms of eco-processes and eco-products. The goal is to understand the intersection between business innovation and environmental responsibility and the way this integration impacts startups’ operational practices. The second question asks whether eco-innovation implementation improves European startups’ capacity to acquire financial resources and boost patent volume. This question investigates whether eco-innovation adoption enhances European startups’ ability to secure financial resources and boost their patent holdings. As financial health is crucial to business operations in enabling startups to acquire necessary products and run their processes, this question seeks to understand the broader relationship between eco-innovation and financial resources, especially the potential for eco-innovation to attract investment and support business growth. This paper also investigates how eco-innovation facilitates the acquisition or utilization of patents, thereby enhancing European startups’ intellectual property portfolio and competitive advantage in the market. The final question asks whether financial resources and patents mediate the relationship between eco-innovation, eco-processes, and eco-products. This question examines whether financial resources and patents actively mediate the link of eco-innovation to eco-process and eco-product implementation. Financial resources are categorized into three types—venture capital, crowdfunding, and business angels—that provide a framework for analyzing how different funding sources influence eco-innovation implementation. Patents—classified into licensed, applied, and registered—as well as financial resources, also mediate in achieving the desired outcomes of eco-innovation.

The research questions are sequenced to explore the relationships between this study’s key variables and provide a comprehensive understanding of how eco-innovation influences the dynamics of European startups. Understanding these relationships is vital to gaining a comprehensive view of how eco-innovation influences business practices and financial health in European startups. By analyzing the mediating roles of financial resources and patents, this study aims to uncover the mechanisms through which eco-innovation drives sustainable business practices and contributes to startup success.

The significance of this study lies in its multi-dimensional analysis of eco-innovation implementation by European startups. By examining three key dimensions—customer demand, expected benefits, and description of green innovation—its comprehensive approach advances insight into the dimensions influencing how startups incorporate ecological considerations into their processes and products. This study also seeks to fill a critical gap in understanding the challenges and opportunities related to eco-innovation in European startups. The outcomes are valuable to a varied audience. Founders and managers of startups can leverage them to promote performance, and policymakers can benefit from evidence-based views to create targeted programs and prop mechanisms. This study also strives to contribute to theory building in the eco-innovation literature by providing both empirical data and theoretical contributions tailored to a context that promotes evolution and progress in the business landscape.

2. Literature Review

This study investigates the impact of eco-innovation implementation on eco-processes and eco-products, including the mediator role of financial resources and patents. The independent variable, eco-innovation implementation, plays a crucial role in promoting the development of new products and processes while minimizing environmental impact [19]. The dependent variables, eco-processes and eco-products, are also crucial in this context. Eco-processes are techniques aimed at reducing the carbon footprint, such as the use of energy-efficient technologies, whereas eco-products involve the development of goods with a lower environmental impact, such as biodegradable plastics [20,21]. The mediating variables, financial resources and patents, further shape these relationships. Financial resources enable startups to invest in product development initiatives grounded in eco-innovation [22,23], while patents protect the resulting innovations. Finally, the control variables, startup age and number of employees, are included to account for their influence on the relationship between the independent and dependent variables.

Eco-innovation is the systematic process of developing and applying processes, products, and practices that deliver environmental gains [24]. Startups stand to benefit from eco-innovation because it delivers economic gains by reducing material and energy costs [25,26]. Eco-innovation also gives startups a competitive advantage by differentiating them from the competition [27]. Eco-innovation is especially suited to startups because they are emerging business entities that operate in dynamic and highly competitive environments [28]. Several key factors explain the close association between startups and green innovation. First, startups are inherently agile, benefiting from less rigid organizational structures that enable them to adopt eco-innovative practices more readily [29]. Second, startups are inherently innovation-driven and place strong emphasis on problem-solving and risk-taking [30], characteristics that facilitate the pursuit of eco-innovation. Third, startups frequently face resource constraints that require them to seek more cost-effective and efficient mechanisms [31], which can be achieved through eco-innovation.

This study explores three key dimensions of eco-innovation for startups: customer demand, expected benefits, and description of green innovation. In the customer demand context, Zhang et al. [32] argued that global interconnectedness has accelerated consumers’ awareness of the environmental impacts of the products they use. Such growing awareness and market demand for environmentally sustainable solutions promotes eco-innovation [33]. Nielsen and Hojlund [34] found that consumers are very willing to pay premium prices for eco-friendly products, indicating a shift in purchasing behavior towards sustainability. Startups that position themselves through eco-innovation can thus capture market share and boost their profitability [35]. Another aspect of consumer demand is consumers’ increased willingness to pay high prices for environmentally sustainable products [36]. Startups that successfully integrate eco-innovation into their business models can thus achieve higher consumer satisfaction and loyalty [37]. The second dimension is embodied in expected benefits, as eco-innovation delivers benefits such as increased efficiency, cost savings, and consumer demand. Eco-innovation also bolsters startups’ profitability, improving their competitiveness and long-term survivability [38]. Hammoud and Chahine [39] demonstrated that eco-innovation not only improves financial performance but also enhances a startup’s reputation and brand value. Additionally, startups that embrace eco-innovation add value to their brands by distinguishing themselves through innovative cultures [40]. Wagner [41] found that startups that use eco-innovation introduce products that enable them to capture and expand their market share. Startups are more likely to integrate green technologies with these benefits [7]. Moreover, Mio and Venturini [42] identified the ways in which eco-innovation contributes to sustainable development goals (SDGs) and stressed its importance in enhancing long-term viability. The final driver is the description of green innovation, which requires a clear succinct description of the scope, impact, and benefits of eco-innovation in startups [43]. Proper communication will further bolster organizational support and commitment to eco-innovation solutions [44], and the greater the clarity of green practices, the more startups will adopt green innovations [45]. This paper considers products and services green when they lead to solid waste disposal, recyclable materials, reduced water and air pollution, energy conservation, and reduced consumption [46]. It follows that eco-innovation advances eco-processes by increasing the efficiency of resource utilization initiatives [47]. De Marchi [48] showed that eco-innovation has enabled startups to reduce waste and resource consumption. Further, eco-innovation accelerates the development of environmentally sustainable products (eco-products).

H1. 

Eco-innovation implementation positively affects eco-processes.

H2. 

Eco-innovation implementation positively affects eco-products.

Financial resources also play a vital role in the interaction between eco-innovation, eco-processes, and eco-products. According to Cumming et al. [49], eco-innovation drives financial resources by enhancing the recruitment of critical stakeholders, such as angel investors and crowdfunding solutions. These investors are often drawn to startups that implement eco-innovation due to their strong governance and corporate social responsibility principles [50,51]. Moreover, eco-innovation contributes to cost savings by reducing energy consumption and waste generation [52,53,54]. These financial savings can be re-invested in the business to increase operational efficiency [55]. The literature further underscores the positive effect of financial resources on eco-processes and eco-products. De Marchi [48] argued that financial resources enable startups to invest in technologies and processes that can deliver environmental benefits. Financial resources have also accelerated the development of new products that meet environmental needs. Horbach et al. [56] found that startups with sufficient financial investments have successfully undergone product prototyping, development, and testing.

Several types of financial resources contribute uniquely to the eco-innovation landscape. For instance, venture capital (VC) firms provide significant funding, frequently associated with strategic mentorship and networking opportunities. Accelerating the growth of eco-innovation, this funding is particularly critical in sectors that require substantial R&D investments. VC-backed firms are more likely to engage in high-risk, high-reward innovations, including sustainable technologies [57]. VCs typically seek quick returns, however, potentially pressuring startups to focus on short-term profitability rather than long-term environmental goals [58]. Business angels, in contrast, are often experienced entrepreneurs who provide smaller-scale investments in the early stages of startup development. Unlike VCs, their involvement is more flexible, enabling startups to allocate funds with greater autonomy [59]. Such flexibility is particularly beneficial for eco-innovation that requires an experimental approach or longer development timelines. Business angels are also often more personally invested in the startup’s success and thus more tolerant of environmentally driven projects that may not generate immediate financial returns [60]. Finally, the democratized character of crowdfunding empowers startups to secure capital directly from the public. For eco-innovative startups, crowdfunding is especially effective in attracting environmentally conscious consumers who provide both financial backing and market validation. Mollick [61] observed that startups that leverage crowdfunding can often overcome traditional financial barriers, especially when they have failed to attract VCs or angel investors due to anticipated risks. By enabling firms to test market demand and gain public visibility, crowdfunding is also an increasingly important funding mechanism for sustainability-oriented startups [62]. Crowdfunding may be less dynamic for large-scale innovation efforts, however, because it typically yields smaller amounts of funding.

H3. 

Eco-innovation implementation positively affects financial resources.

H3a. 

Financial resources positively affect eco-processes.

H3b. 

Financial resources positively affect eco-products.

Another reason that eco-innovation plays a significant role in startups is that startups’ relationship to patents is crucial for driving both innovation and competitiveness. Kesidou and Demirel [63] suggested that eco-innovation has driven the development of new and innovative products and thus correlates with increased numbers of patent applications (patents applied for). Startups must secure patents through formal registration (patent registration) to protect unique innovations and enhance competitive advantage in niche markets [64]. Startups must also protect their proprietary technologies by acquiring patents because they have more limited resources than larger firms. Legal protection thus strengthens startups’ competitive position, enabling them to concentrate on refining and scaling their eco-innovative solutions by reducing their concern about potential imitation by competitors Hojnik and Ruzzier [30]. Further significant research shows the positive impact of patents on eco-products and eco-processes. For instance, De Marchi [48] established that patents are a powerful incentive for developing eco-processes, leading to overall enhancements in business operations. Patents are also integral to transferring technology between startups, effectively accelerating (patents licensed) eco-processes [65]. In a separate study, Wagner [41] found that patents enable firms to secure their products, accelerating differentiation from competitors. The fact that investors and stakeholders view these eco-products as valuable attracts more investment in the startup.

H4. 

Eco-innovation implementation positively affects patents.

H4a. 

Patents positively affect eco-processes.

H4b. 

Patents positively affect eco-products.

The literature has also examined the relationship between eco-processes and eco-products. Vachon and Klassen [66] found that startups that collaborate with their suppliers to attain higher production practices (eco-processes) achieve higher levels of eco-product production. Tseng [67] showed that startups that implement green technologies achieve higher product throughput levels. Finally, Sarkis and Dhavale [68] demonstrated that startup engagement in development initiatives focusing on green technologies (eco-processes) results in the development of environmentally friendly products.

H5. 

Eco-processes positively affect eco-products.

2.1. Literature Gap

Previous studies have examined the research variables in isolation. For instance, Cumming et al. [49] focused on eco-innovation and financial solutions, while Cheng and Shiu [65] analyzed patents and eco-innovation. Yet no integrated study has examined the interactions between the dimensions of eco-innovation implementation, eco-processes, eco-products, financial resources, and patents—a significant research gap. Further investigation is needed to understand the interrelations among these variables.

Another significant gap exists in the current research on the level of green innovation among European startups. While the existing literature provides valuable insights into specific national contexts, no comprehensive analysis has been performed that spans the diverse landscape of green entrepreneurial activity across this continent. Among studies with a national focus, Serio et al. [16] studied the characteristics of Italian green and non-green startups between 2009 and 2018 to explore survival rates. Abbas and Liu [35] identify the challenges that Pakistani and Bangladeshi startups face in resource-scarce economies, as well as innovative ways to deal with these challenges. Abdesselam et al. [69] conducted a comparative analysis of 120 French startups categorized as green and non-green to identify what distinguishes eco-innovative startups from non-innovative startups, thus identifying the key factors that drive eco-innovation within the startup landscape.

The lack of continent-wide studies hinders our understanding of broader trends and differences in green innovation throughout the European startup ecosystem. This study aims to address this gap by providing a more comprehensive view of eco-innovation in this ecosystem. Such a comprehensive study will generate deeper insight into the dynamics of eco-innovation in startups.

2.2. Conceptual Framework

The conceptual framework, illustrated in Figure 1, depicts the relationships among the key variables in this study. It represents how the independent variable, eco-innovation implementation, affects the dependent variables, eco-processes and eco-products. The framework also includes the mediating role of financial resources and patents in shaping the impact of eco-innovation on the dependent variables. More specifically, it shows how eco-innovation implementation influences the availability of financial resources and the use of patents, which may in turn affect eco-processes and eco-products. Finally, the framework incorporates the connection between eco-processes and eco-products.

Including control variables such as startup age and number of employees adds depth to the framework by analyzing contextual factors that may influence these dynamics. Including these variables ensures that the analysis is robust and comprehensive, providing a nuanced understanding of the factors driving eco-innovation in startups.

This conceptual framework is vital to the research process. It organizes and integrates the core concepts to provide a clear systematic structure for examining the complex interactions among these variables. It not only enhances this study’s clarity and focus but serves as a roadmap for hypothesis development and empirical testing. By visually representing the direct and indirect relationships, the framework helps to identify potential pathways through which eco-innovation implementation impacts organizational outcomes.

3. Methodology

3.1. Data Collection

Startups face numerous challenges, such as obstacles due to their small size and the demands of newness. These challenges affect startups’ operations directly or indirectly, whether green or traditional, especially in the early stages [70]. This study seeks to understand some of these challenges through the analysis of various variables using a mixed design that combines quantitative and qualitative perspectives. A mixed-method approach is well suited to this goal because integrating quantitative and qualitative data enables a more comprehensive interpretation and understanding of the research variables [71]. Mixed methods also provide a more nuanced perspective of the relationships between the variables and the research questions, thus enhancing the findings’ robustness and validity.

The data for this study were collected from a sample of European startups that spanned all sectors, using a structured questionnaire designed on Google Forms. The questionnaire included a clear explanation of this study’s purpose to ensure that participants fully understood their involvement. To minimize respondent burden, the questionnaire was designed to take 10 min to complete. (For a comprehensive description of the questionnaire sections, see Appendix A.1 and Appendix A.2) The data were collected over 11 months, from September 2020 to July 2021, using two primary methods. The questionnaire was first sent to European startups’ email addresses, a method that required creating a database on Microsoft Excel with separate entries for each country and organizing the data according to the name of the startup, e-mail, and data source. As this method yielded a low response rate, a second collection method followed in February 2021, in which the questionnaire was distributed to startup employees through LinkedIn, thus communicating with them directly. The employees targeted held positions such as founder, co-founder, CEO, COO, CFO, CMO, CPO, and CRO. From these startups, a second database was generated in Microsoft Excel that mirrored the structure of the first database. The second approach improved response rates demonstrably over the email-based strategy. The websites EU-Startups and Startupxplore provided the primary data for identifying relevant European startups. Selected for their credibility, these platforms focus on European startups, thus enhancing the internal validity and generalizability of the sample.

This study included six pivotal variables, with eco-innovation implementation as the independent variable, measured through three dimensions: customer demand, expected benefits, and description of eco-innovation. Mediator variables were financial resources, classified into venture capital, business angels, and crowdfunding, and patents, classified into patents applied for, registered, and licensed. The dependent variables, eco-processes and eco-products, played a central role in the theoretical model. To enhance the robustness of the results, the control variables, startup age and number of employees, were also incorporated. Each variable was assessed using a series of Likert scale questions (ranging from 1 to 5) to capture responses related to customer demand, expected benefits, description of green innovation, eco-processes, and eco-products. Financial resources, patents, startup age, and number of employees were measured using open-ended numerical questions.

The questionnaire was distributed to 2636 email addresses and LinkedIn contacts and resulted in 120 responses from European startups across various sectors, yielding a response rate of 4.54%. A sample size of at least 50 responses was required to represent the general population. While larger samples are generally preferred to minimize the margin of error, a larger size was not essential for this study and would have created unnecessary time and resource constraints. Finally, the research adhered to strict ethical guidelines to ensure the confidentiality of respondents’ information.

3.2. Variables and Measures

This study addresses the research questions by examining the interactions between eco-innovation implementation, eco-processes, and eco-products, while also exploring the potential mediating roles of financial resources and patents. Quantitative statistical techniques, including descriptive statistics and structural equation modeling (SEM), were used to analyze these relationships. SEM is especially suitable for this analysis. Its ability to evaluate both direct and indirect effects makes it ideal for investigating how financial resources and patents mediate the relationship between eco-innovation implementation, eco-processes, and eco-products.

A quantitative approach was applied to assess the effect of eco-innovation implementation (IV)—a multidimensional construct that includes customer demand, expected benefits, and description of green innovation—on eco-processes and eco-products (DVs). Financial resources (classified as venture capital, business angels, and crowdfunding) and patents (classified as registered, applied for, and licensed) served as mediating variables. To control for external factors and enhance this study’s internal validity [72], startup age and number of employees were included as control variables.

Data analysis was conducted using SmartPLS 4 software, which facilitated scale validation and confirmed whether individual items within a scale were reliable. Factor loadings were estimated for each item, with an expected loading threshold of 0.7 or higher. These estimates guided decisions on Cronbach’s alpha values and the criteria for validity, such as convergent validity and composite reliability. An advanced regression model was used to test the proposed hypotheses. This study assumed that European startups face similar challenges, or that any variations would have a uniform impact across the various startups. It also assumed that respondents would provide accurate responses to the survey, which was disseminated via email and LinkedIn. Most outlier data resulting from unexpected responses were excluded through data analysis using SmartPLS 4 software.

4. Results

Little literature exists on the impact of eco-innovation implementation on eco-processes and eco-products with the mediating role of financial resources and patents. This study thus seeks to bridge the gap by exploring the interplay among this cohort of variables to elucidate eco-innovation implementation by European startups. This section presents the outcomes of the statistical analysis, as well as the descriptive statistics defining the characteristics of the variables. It also presents the SEM results employed to assess the validity of the proposed hypotheses.

Of a total of 120 responses, 6 were excluded from the dataset. These responses were deemed unsuitable for the target segment due to either misalignment in startup age, employee count, or too much missing data to enable meaningful analysis. The missing values were indicated as −99 in the data set so that SmartPLS 4 would omit them from the statistical analysis.

4.1. Descriptive Statistics

Table 1. Descriptive statistics.

Variable	Mean	Standard Deviation	Kurtosis	Skewness
S.AGE	3.178	2.492	1.492	1.279
NOE	29.782	184.266	98.178	9.744
FR.VC	4,952,631	47,878,676	107.809	10.379
FR.BA	376,599.8	1,311,479	32.659	5.435
FR.C	31,875	205,842.3	78.337	8.555
PAT.R	0.867	4.727	104.93	10.077
PAT.L	0.575	2.887	96.874	9.538
PAT.A	0.673	1.593	24.579	4.37
EII.PS	3.523	1.434	−1.050	−0.604
EII.PT	3.151	1.541	−1.386	−0.189
CD	3.307	1.330	−0.947	−0.293
EB	3.679	1.345	−0.43	−0.798
DGI	3.357	1.556	−1.284	−0.415

presents the descriptive statistics for the cohort of variables analyzed, with a total of valid 114 observations per variable. The numerical variables included startup age and number of employees as control variables and financial resources and patents as mediator variables. The results show the average startup age as 3.178 (SD = 2.492) and the average number of employees as 29.782 (SD = 184.266). The average number of patents held by European startups was 0.705 (SD = 3.069). Financial resources—specifically venture capital—had the highest average, 4,952,631, followed by business angels, with 376,599.8. Crowdfunding had the lowest average, 31,875. Financial resources also showed the largest standard deviation (SD), indicating considerable variation, whereas startup age and patents had the lowest SD and thus minimal variation [73]. Customer demand, green innovation, expected benefits, eco-processes, and eco-products were assessed as ordinal variables with values ranging from 1 to 5. The averages for these variables ranged from 3 to 3.7, with SDs ranging from 1.3 to 1.6.

Data analysis showed positive skewness in financial resources, patents, startup age, and number of employees, suggesting a concentration of lower values among these variables [74]. Skewness higher than one in all instances indicated a large departure from normality [75]. The ordinal variables, in contrast, showed negative skewness, indicating a predominance of higher values. Given the presence of skewness in the data, non-parametric techniques such as structural equation modeling (SEM) were deemed appropriate for the subsequent analysis [76].

4.2. Reliability

Reliable and consistent measures are fundamental to research validity.

Table 2. Reliability.

	Cronbach’s Alpha	rho_A	Composite Reliability	Average Variance Extracted (AVE)
Expected benefits	0.914	0.915	0.933	0.7
Customer demand	0.911	0.912	0.938	0.79
Description of green innovation	0.872	0.875	0.904	0.613
Eco-innovation implementation	0.929	0.93	0.938	0.485
Financial resources	0.18	0.188	0.575	0.364
Patents	0.679	0.876	0.839	0.668
Eco-processes	0.906	0.909	0.928	0.682
Eco-products	0.958	0.96	0.965	0.775
Number of employees	1	1	1	1
Startup age	1	1	1	1

displays the values for Cronbach’s alpha and composite reliability used to evaluate construct reliability. A Cronbach’s alpha above 0.7 is generally considered to indicate acceptable internal consistency [77]. In this study, financial resources (α = 0.180) and patents (α = 0.679) showed suboptimal reliability. The recommended threshold for construct reliability is usually composite reliability greater than 0.6 [78]. All variables except financial resources met this criterion, as supported by their corresponding composite reliability and rho_a values.

4.3. Validity

Construct validity is critical to the outcomes, as it evaluates the extent to which the measures precisely reflect the underlying constructs they are supposed to measure [79]. Construct validity has two dimensions: convergent and discriminant validity. Convergent validity, indicated by the Average Variance Extracted (AVE), determines the degree to which items within a construct converge on a common factor [80]. As Table 2 shows, all constructs except financial resources provide an AVE above the recommended threshold of 0.50, demonstrating acceptable convergent validity. Second, discriminant validity, assessed using the Fornell–Larcker criterion (

Table 3. Validity.

	Customer Demand	Description of Green Innovation	Eco-Innovation Implementation	Eco- Processes	Eco- Products	Expected Benefits	Financial Resources	Numbers of Employees
Customer demand	0.889
Description of green innovation	0.6	0.783
Eco-innovation implementation	0.797	0.876	0.696
Eco-processes	0.562	0.648	0.712	0.826
Eco-products	0.583	0.757	0.751	0.796	0.88
Expected benefits	0.498	0.569	0.838	0.573	0.536	0.837
Financial resources	0.002	0.138	0.111	0.168	0.168	0.117	0.603
Number of employees	−0.015	0.064	0.053	0.09	0.094	0.068	0.329	1
Patents	0.079	0.161	0.136	0.103	0.156	0.094	−0.038	−0.014
Startup age	−0.004	0.104	0.067	0.093	0.11	0.05	0.091	0.206

), ensures discrimination between different constructs [81]. These findings suggest that the square root of each construct’s AVE is greater than its correlation with other constructs, demonstrating satisfactory discriminant validity for all variables.

4.4. Multicollinearity

Table 4. R-squared values.

	R-Squared	Adjusted R-Squared
Eco-innovation implementation	1	1
Financial resources	0.012	0.003
Patents	0.018	0.01
Eco-processes	0.517	0.495
Eco-products	0.708	0.692

shows the R-squared values of the variables. Multicollinearity is measured by the variance inflation factor (VIF), which is directly proportional to R-squared [82]. A high R-squared thus indicates potential multicollinearity and a low R-squared minimal multicollinearity. In this study, only eco-innovation implementation showed evidence of multicollinearity, as its R-squared value exceeded the commonly accepted threshold of 0.8. This multicollinearity can be attributed to the construct’s second-order nature, with three distinct dimensions.

4.5. Path Coefficients and Mediation

Table 5. Path coefficients.

	T-Statistic (|O/STDEV|)	p- Value
Customer demand -> Eco-innovation implementation	10.574	0.00 ***
Expected benefits -> Eco-innovation implementation	13.114	0.00 ***
Description of green innovation -> Eco-innovation implementation	11.719	0.00 ***
Eco-innovation implementation -> Eco-processes	13.058	0.00 ***
Eco-innovation implementation -> Eco-products	4.111	0.00 ***
Eco-innovation implementation -> Financial resources	2.026	0.022 *
Financial resources -> Eco-processes	2.031	0.021 *
Financial resources -> Eco-products	0.937	0.175 *
Eco-innovation implementation -> Patents	1.276	0.101 *
Patents -> Eco-processes	0.195	0.423 *
Patents -> Eco-products	1.291	0.099 *
Eco-process -> Eco-products	5.346	0.00 ***

* p < 0.10; *** p < 0.01.

presents the t-statistics and corresponding p-values for the relationships between variables. T-statistics with an absolute value higher than 1.96 indicate a statistically significant association at the 0.05 level [83]; values below this threshold suggest a weaker relationship.

The results demonstrate a robust relationship between eco-innovation implementation and its constituent dimensions: customer demand, description of green innovation, and expected benefits (all p < 0.000). Eco-innovation implementation is also significantly associated with eco-processes (p < 0.000) and eco-products (p < 0.000). While the link between eco-innovation implementation and financial resources is significant at the 0.05 level (p = 0.022), it is slightly weaker. Furthermore, a strong association exists between eco-processes and eco-products (p < 0.001), and financial resources are significantly related to eco-processes (p = 0.021).

4.6. Effect Size

Cohen’s d, a standard effect size measure for group comparisons, was deemed inappropriate for this study due to its cross-sectional design and lack of group-based analyses. R-squared and F-squared were used instead. While the R-squared values indicated varying levels of variance explained, their interpretation was limited. F-squared, which provides a more direct measure of effect size, showed substantial effects between eco-innovation implementation and its dimensions, as well as between eco-innovation implementation and eco-processes. A strong effect was also observed between eco-processes and eco-products, but financial resources and patents exerted negligible effects on the variables examined. (See

Table 6. F-squared values.

	Customer Demand	Description of Green Innovation	Eco-Innovation Implementation	Eco- Processes	Eco- Products	Expected Benefits	Financial Resources	Numbers of Employees	Patents	Startup Age
Customer demand			1029.603
Description of green innovation			1768.985
Eco-innovation implementation				0.975	0.226		0.012		0.019
Eco-processes					0.448
Eco-products
Expected benefits			1973.677
Financial resources				0.012	0.004
Number of employees				0.001	0
Patents				0	0.009
Startup age				0.002	0.003

).

5. Discussion

The following section presents a concise analysis of this study’s findings. Financial resources emerged as the only variable with low internal consistency, and all variables except financial resources showed convergent validity. Despite this, financial resources and all other variables displayed discriminant validity. The results obtained for financial resources should thus be interpreted with caution. It is also important to note that multicollinearity did not affect this model, as all variables except the second-order variable (eco-innovation implementation) were free of multicollinearity.

Table 7. Hypothesis validation.

Hypothesis	Support (Yes/No)
H1. Eco-innovation implementation positively affects eco-processes.	Yes
H2. Eco-innovation implementation positively affects eco-products.	Yes
H3. Eco-innovation implementation positively affects financial resources.	Yes
H3a. Financial resources positively affect eco-processes.	Yes
H3b. Financial resources positively affect eco-products.	No
H4. Eco-innovation implementation positively affects patents.	No
H4a. Patents positively affect eco-processes.	No
H4b. Patents positively affect eco-products.	No
H5. Eco-processes positively affect eco-products.	Yes

and Figure 2 summarize the validation of the hypotheses by contrasting the p-values with a significance level of 0.05.

Figure 2 confirms that eco-innovation implementation has a significant positive impact on both eco-processes and eco-products, as H1 and H2 were accepted, both with a significance level of p = 0. These results align with Al-Hanakta et al. [47], who found that eco-innovation was closely related to eco-processes. The results also correspond to De Marchi [48], who supported the interconnection between eco-innovation and eco-products. These alignments have broader implications in European startup contexts, however. They indicate that European startups that implement eco-innovation practices not only boost their processes and products but also strengthen their competitive position in markets increasingly shaped by sustainability demands. The outcomes thus suggest that eco-innovation serves as both a catalyst of internal efficiency and a key differentiator in the market, enhancing European startups’ ability to meet evolving environmental expectations and standards.

The findings also support H3, which posits that eco-innovation implementation positively affects financial resources (p = 0.022). This finding is important, as it suggests that eco-innovation plays a pivotal role in attracting financial investment, particularly from investors with a focus on sustainable and environmentally responsible ventures. In this context, startups that adopt eco-innovation are more likely to secure increased financial support, which can be critical for their growth and scalability. A more detailed inspection of the sub-hypotheses reveals mixed findings, however. While the findings support H3a, that financial resources positively affect eco-processes (p = 0.021), they do not support H3b, which posits that financial resources positively affect eco-products (p = 0.175).

More broadly, the support for H3a suggests that financial resources are often allocated to improve operational efficiencies, such as reducing resource use and energy consumption, as De Marchi [48] noted. The non-significant result for H3b may, in contrast, indicate that financial resources benefit process innovation but are not as readily channeled into product innovation. This finding may be attributed to the inherent risks and costs of developing new eco-products, which are higher than those of optimizing processes. Due to their resource constraints, European startups may prioritize process improvements that promise direct cost savings and operational efficiencies over long-term product innovation, which frequently requires further substantial investment and long development timelines. This finding highlights the importance of European startups balancing their investment strategies, potentially seeking additional financial mechanisms to support eco-product development. This analysis thus establishes that financial resources fully mediate the relationship between eco-innovation implementation and eco-processes, highlighting the crucial role of financial support in enabling European startups to adopt eco-innovations at the process level. For Yurdakul and Kazan [52], who linked eco-processes to cost savings and energy efficiency, mediation of financial resources indicated that eco-process improvements depend on the availability of sufficient financing. Startups that successfully access financial resources are better positioned to adopt and integrate eco-process innovations, leading to greater efficiency and sustainability. The indirect path between eco-innovation implementation, financial resources, and eco-products was not significant, however, suggesting that financial resources do not mediate the relationship between eco-innovation and eco-products. This finding highlights an important limitation; while eco-innovation attracts financial resources for advancing processes, it does not drive product innovation. Factors such as technological capabilities, market conditions, or regulatory incentives may be needed to translate financial resources into eco-product development. The absence of mediation thus suggests that startups should explore alternative strategies, such as partnerships or targeted funding, to support eco-product innovation.

To attract influential investors who prioritize both sustainability and financial returns, startups must establish robust relationships with these stakeholders. Startups must interact effectively with their eco-innovations’ market potential and environmental benefits, stressing their scalability and long-term viability. Such strategic alignment both enhances the attractiveness of their ventures and positions them as viable candidates for investment, fostering sustainable growth. Startups can also leverage government incentives and public–private partnerships (PPPs), as multiple governments provide grants and subsidies to bolster eco-innovation, decreasing reliance on private investment. PPPs give startups access to additional resources, expertise, and credibility, and such empowerment makes them more appealing to investors. Furthermore, crowdfunding is a viable alternative for startups unable to secure traditional investment, as it enables direct engagement with environmentally conscious consumers. To maximize the efficiency of this approach, startups must maintain transparent communication about the environmental benefits of their innovations and their allocation of funds. Such transparency is vital to building trust and fostering engagement with contributors, often through reward-based models that enhance consumer loyalty and long-term support. Additionally, strategic alliances with large firms or research foundations can help startups acquire resources and expertise. Joint investments, in which multiple investors share the financial risk, are particularly useful for startups with large capital needs in areas such as renewable energy and sustainable materials. Governments can further support eco-innovation by providing tax incentives for green investments and facilitating access to venture capital through reduced bureaucratic barriers, and such policies can stimulate more private investment to help startups overcome financial challenges.

The results for H4, H4a, and H4b, on the role of patents, were less conclusive. H4, which posits that eco-innovation implementation positively affects patents, was not supported (p = 0.101), nor were the hypotheses suggesting that patents positively affect eco-process (p = 0.423) and eco-products (p = 0.099). These findings contrast with those in the extant literature. Cheng and Shiu [65] and Kesidou and Demirel [63], for example, stress the pivotal role of patents in fostering eco-process and eco-product innovation.

The finding that patents do not mediate eco-innovation through H4, H4a, and H4b in European startups can be attributed to several distinctive features of the startup ecosystem. The literature suggests that startups typically de-prioritize patents in their innovation strategies due to various constraints, such as limited financial resources, the time-consuming nature of patent processes, commercial secrecy, and a preference for external partnerships fostered through open innovation models. Thus, startups often face large resource limitations, particularly in financial and human capital. This strategy restricts their ability to pursue patent protection, an inherently resource-intensive process. Empirical evidence shows that startups are more likely to focus on swift market entry, customer acquisition, and product development than on securing patents [84]. Since the patenting process can take years, startups may prefer alternative patterns of innovation protection, such as speed to market or maintaining trade secrets [85]. Furthermore, because eco-innovation startups are frequently driven by urgent environmental goals and the need to adapt promptly to evolving regulatory landscapes, they often prioritize practical short-term actions over long-term intellectual property strategies. For example, Hockerts and Wüstenhagen’s [86] study on green startups found that these firms often engage in collaborative efforts, minimizing their reliance on patents by embracing more open knowledge-sharing practices. Chesbrough and Bogers [87] similarly highlight the importance of open innovation models to startups, due especially to their high reliance on external knowledge flows and partnerships to compensate for their bounded internal resources. In the context of eco-innovation, this collaborative approach further reduces reliance on patents as a mechanism for competitive advantage. Startups may instead leverage first-mover advantages, lead-time strategies, or tacit knowledge as more effective tools for protecting their innovations [88]. Thus, the non-significant role of patents in mediating eco-innovation in European startups can be explained by their resource constraints, reliance on collaborative innovation practices, and need for rapid market adaptation. These findings highlight startups’ unique innovation dynamics, where patents play a less central role than in larger, more established firms.

Lastly, the findings support H5 (p = 0), which confirms that eco-processes positively affect eco-products. This finding corresponds with that of Vachon and Klassen [66], who indicate a strong link between process and product. The results suggest that startups prioritizing the enhancement of eco-processes—such as waste reduction, improved energy efficiency, and streamlined production—are better positioned to develop eco-products that align with the preferences of environmentally conscious consumers. Similarly, startups that implement eco-processes also increase eco-product development [68]. This relationship highlights that startups committed to sustainability frequently integrate eco-products with eco-processes.

This comprehensive analysis of the research questions yields several key implications. Firstly, this study provides substantive evidence for the positive impact of eco-innovation on both eco-processes and eco-products (H1 and H2). These findings are consistent with the existing literature that supports the pivotal role of eco-innovation in enhancing sustainability practices within startups. Secondly, this study provides valuable insights into the mediating role of financial resources (H3, H3a, and H3b). While these resources are of critical importance in facilitating eco-processes, their influence on eco-products is less clear. This disparity in the results highlights the need for European startups to allocate financial resources strategically to enhance operational efficiencies and process improvements, actions that can have a more immediate and measurable impact. Thirdly, the non-significant role of patents (H4, H4a, and H4b) in mediating the relationship of eco-innovation to both eco-processes and eco-products requires more in-depth research. Understanding the barriers that prevent European startups from leveraging patents effectively (e.g., high cost of patent applications, limited access to intellectual property expertise, strategic focus on other forms of innovation protection) is essential. Future research should investigate these challenges in greater depth, as it is crucial to improving our understanding of how European startups can more effectively leverage patents as a mechanism to protect and commercialize eco-innovative solutions. Fourth, the strong and statistically significant relationship between eco-processes and eco-products (H5) highlights the interconnected nature of sustainable innovation in startups. This finding indicates that improving process efficiencies, such as waste reduction and resource conservation, can directly support eco-product development. By optimizing eco-processes, European startups can thus not only reduce operational costs but also reinvest these savings in eco-product development, fostering long-term competitive advantage.

Although this study provides valuable contributions, several limitations may have influenced the explanation of the findings. Firstly, the low reliability of financial resource data emerged as a clear limitation. This issue may be impossible to avoid, given the variability in European startups’ management and reporting of financial data, particularly in the early stages of development. The inherent complexity of measuring these financial resources, which frequently involve fluctuating funding sources and irregular inflows of capital, likely contributed to this challenge. Future studies could, however, improve data reliability by incorporating more detailed financial metrics, such as specific categorizations of financial sources (e.g., venture capital, government grants, and crowdfunding) and longitudinal data collection to track financial dynamics over time. Despite financial constraints, resource availability still plays a crucial role in enabling European startups to implement eco-processes effectively. Secondly, this study explored the mediating role of financial resources and patents but found relatively small effect sizes, especially for patents. This finding may indicate that the mediation model does not fully capture the complexity of these factors’ interactions with eco-innovation. The non-significant mediating role of patents could also be due to the nature of the European startups in the sample, as these firms might not prioritize patenting as a primary form of innovation protection due to cost constraints or alternative mechanisms such as secrecy. Future studies could include additional mediating or moderating variables, such as external market conditions or government support, to provide a more nuanced understanding of the factors that influence eco-innovation. Thirdly, while survey data are valuable for obtaining insights from European startups, they may introduce biases such as social desirability, wherein respondents provide favorable responses rather than accurate reflections of their practices. Furthermore, subjective measures may inadequately capture the complexities of eco-innovation practices. Future research could enhance the validity of survey responses by incorporating objective data, such as financial statements, patent filings, or product certifications, thereby facilitating a more comprehensive assessment of eco-innovation outcomes.

6. Conclusions

This study demystifies the complex effects of eco-innovation implementation on green processes and sustainable products in a dynamic corporate environment where environmental responsiveness is paramount. It further contributes to the ongoing exploration of sustainability in the European startup landscape by integrating financial resources and patents as mediating variables. The investigation reveals environmentally desirable outcomes, indicating that both eco-processes and eco-products reflect the environmentally responsible practices of European startups. More specifically, this interaction underscores the pivotal role that startups play in establishing sustainable operational actions. The components of eco-processes and eco-products highlight the multifaceted nature of sustainable business operations, as both are directly influenced by eco-innovation implementation, which is driven by factors exemplified in customer demand, expected benefits, and descriptions of green innovation.

The dynamic dimensions of eco-innovation implementation reflect a comprehensive understanding of its impact on European startups’ adoption of green innovation. The relationship between customer demand and eco-innovation implementation further highlights the alignment of environmental consciousness with consumer preferences. This positive correlation reveals growing environmental awareness across Europe, motivating startups to integrate green innovation into their business models. The findings also suggest that these startups are driven by aspirations to enhance profitability, increase market share, gain a competitive advantage, and strengthen their brands—all goals that can be achieved through sustainable green innovation in both processes and products. The positive correlation obtained between expected benefits and eco-innovation implementation further reflects European startups’ genuine commitment to achieving these gains, thereby promoting environmental sustainability and contributing to combating climate change. Moreover, the final dimension, the description of green innovation, reveals the integrative importance through a positive association with eco-innovation implementation. Specifically, the more committed stakeholders are to environmental concerns, the stronger the implementation of eco-innovation. Stakeholders may thus adopt eco-innovation practices either in response to market dynamics and the need to maintain competitive advantage or due to heightened awareness of their responsibility to mitigate environmental risks. In all scenarios, a shift towards sustainable practices addresses several pressing issues, including solid waste disposal, reduced water and air pollution, energy conservation, and material recycling.

This study identifies a significant direct linkage between eco-innovation implementation and eco-products, demonstrating the complementary nature of these elements, independent of mediating factors. This direct impact highlights the critical influence of innovative approaches on the development of environmentally conscious products. Such effects are particularly pronounced in startups, whose agility and adaptability enable them to integrate sustainability quickly into their offerings. Furthermore, financial resources are identified as a pivotal mediator in the relationship between eco-innovation implementation and eco-process development. European startups are especially dependent on securing adequate financial support to adopt and sustain innovative environmental processes. Access to sufficient funding enables the acquisition of essential technologies, skilled personnel, and other critical resources necessary to optimize and maintain eco-innovations. These findings underscore that without a strong financial foundation and regardless of their innovative potential, startups face significant challenges in effectively implementing eco-innovations. Contrary to traditional assumptions, patents were not found to play a significant mediating role in the relationship of eco-innovation to either eco-processes or eco-products. This finding challenges the conventional view that the protection of intellectual property is vital to fostering eco-innovation. Unlike prior research, this study suggests that the rapidly evolving landscape of environmental innovation in startups prioritizes speed of implementation and adaptability over the long-term protection traditionally afforded by patents. Startups may thus achieve greater success by adopting open innovation models and engaging in collaborative networks, which facilitate faster market entry and more responsive adaptation to environmental imperatives. The non-mediating role of patents prompts a critical re-evaluation of intellectual property strategies in the context of green innovation, encouraging startups to consider alternative mechanisms for protecting their innovations, such as leveraging trade secrets or capitalizing on first-mover advantages. Moreover, the link between demonstrated eco-process and eco-product development reinforces the importance of process innovation as a driver of product innovation. This finding suggests that the sustainability and performance of eco-products are intrinsically associated with the efficiency and innovation embedded in eco-processes. For startups pursuing sustainability, improving operational processes is not only a pathway to enhanced environmental performance but also a lever for producing higher-quality, more sustainable products.

This study calls, however, for startups and policymakers to prioritize financial resource allocation as a key driver of eco-innovation. This goal can be achieved through the creation of targeted funding mechanisms, such as venture capital, government grants, and crowdfunding platforms that direct capital toward green innovation initiatives. In the realm of innovation management, the non-mediating role of patents invites a re-evaluation of traditional intellectual property strategies. Startups may find greater value in open innovation and strategic collaborations, which permit faster implementation of green technologies without the constraints posed by patenting processes.

In conclusion, the findings provide a road map for startups to traverse the complexities of eco-friendly practices while capitalizing on the significant potential for eco-process and eco-product development. Eco-innovation implementation has a significant effect on the performance of most European startups since it affects most of the parameters linked to their performance. This study also develops a comprehensive view of the multiple links between eco-innovation, financial resources, patents, and their influence on eco-process and eco-product results. Finally, by elucidating and untangling these profound links, this study shows a pathway for businesses to adopt sustainability as a key element of their operational culture. As our planet grapples with environmental imperatives, this paper offers a flight insight for entrepreneurs who seek both economic success and environmental responsibility.