Configurational Analysis of ESG Factors and Eco‐Innovation Impact on Financial and Market Performance in Scandinavian Manufacturing Firms

ABSTRACT Environmental, Social, and Governance (ESG) factors and eco‐innovation have become increasingly important in the business landscape. Firms are expected to operate in a responsible and sustainable manner, while stakeholders demand greater transparency and accountability from corporations. This study investigates the complex relationships between Environmental, Social, and Governance factors and eco‐innovation in driving firm performance among Scandinavian manufacturing companies. The research employs the fuzzy set Qualitative Comparative Analysis method to analyse the data from 104 manufacturing firms across Sweden, Norway, and Denmark to identify specific configurations leading to high and non‐high firm performance outcomes. The findings reveal distinct pathways to achieving high financial and market performance. For financial performance, a pronounced emphasis on the environmental pillar, coupled with eco‐innovation initiatives, emerges as the primary driver. For market performance, firms achieve superior performance either through environmental and governance practices or through environmental practices combined with eco‐innovation. Conversely, the presence of all ESG dimensions without eco‐innovation leads to non‐high performance. These findings contribute to understanding how different combinations of ESG practices and eco‐innovation can drive firm success in the Scandinavian manufacturing context.