Balancing act or two roads to travel: Evaluating the trade-offs between digitalization and net zero innovation in SMEs

Abstract

As firms face the dual challenges of digitalization and net zero innovation to combat climate change, understanding how these twin transitions relate is crucial. This study examines potential synergies or trade-offs between digital technologies and net zero innovations in UK SMEs. By integrating the Resource-Based View (RBV) and the Attention-Based View (ABV), we explore how categories of digital adopters relate to categories of net zero innovation adopters. Utilizing novel survey data for 964 UK SMEs, we employ ordered Probit estimation to examine the relationship between digital and net zero adoption. Our results reveal that digitally advanced SMEs are more likely to be advanced adopters of net zero innovations, suggesting that digital complementarities and enhanced capabilities can reinforce environmental innovations that reduce carbon emissions. We offer valuable contributions for both theory and practice, highlighting the importance of supporting SMEs in their twin transitions.