As environmental challenges intensify, green innovation has emerged as a critical component of sustainable growth. Startups are often viewed as important sources of rapid change and green technological advancement. Drawing on the proximity literature and the knowledge spillover theory, this study examines whether the geographic proximity to startups, particularly to green startups, affects the green innovation output of incumbents. Using a panel dataset of 5,569 incumbents and 77,022 startups, we find strong heterogeneity in green innovation outcomes by incumbents' R&D intensity. Geographic proximity to green startups increases green innovation among incumbents with low R&D spending, which is consistent with knowledge spillover mechanisms. In contrast, proximity to green startups is negatively associated with green innovation among R&D-intensive incumbents, consistent with intensified competition for scarce resources, concerns about knowledge leakage, and crowding-out effects. Moreover, we show that these results are more pronounced for subsequent innovation activities than for first-time green patents and are amplified when incumbents share an environmental orientation with nearby green startups.
Wenning et al. (Thu,) studied this question.
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