Exploring the Effects of Innovation Strategies and Size on Manufacturing Firms’ Productivity and Environmental Impact

sustainability Article Exploring the Effects of Innovation Strategies and Size on Manufacturing Firms’ Productivity and Environmental Impact Jean Pierre Seclen-Luna 1,* , Pablo Moya-Fernández 2and Ángeles Pereira 3   Citation: Seclen-Luna, J.P.; Moya-Fernández, P.; Pereira, Á. Exploring the Effects of Innovation Strategies and Size on Manufacturing Firms’ Productivity and Environmental Impact. Sustainability 2021,13, 3289. https://doi.org/ 10.3390/su13063289 Academic Editors: Marco Opazo Basáez, Ferran Vendrell-Herrero and Lorea Narvaiza Cantin Received: 3 February 2021 Accepted: 9 March 2021 Published: 17 March 2021 Publisher’s Note: MDPI stays neutral with regard to jurisdictional claims in published maps and institutional affiliations. Copyright: © 2021 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https:// creativecommons.org/licenses/by/ 4.0/). 1Department of Management, Pontifical Catholic University of Peru, Lima 32, Peru 2Department of Quantitative Methods for Economics and Business, University of Granada, 18071 Granada, Spain; [email protected].es 3Department of Applied Economics, University of Santiago of Compostela, 15705 Santiago de Compostela, Spain; [email protected] *Correspondence: [email protected]; Tel.: +51-1-626-2000 Abstract: In economies that are based on natural resources, efforts to achieve sustainability still seem unclear, especially in manufacturing companies. As a result, from a business perspective, many manufacturers have adopted various strategies to maintain their competitiveness in line with environmental regulations. In addition to product and process innovation, we have analyzed innovation based on product–service innovation (PSI), or servitization, which is seen as key to promoting more resource-efficient economies. This study examines the effects of innovation strategies on productivity and environmental impact. Based on data extracted from the National Innovation Survey of the manufacturing industries of Peru, a sample of 791 companies were analyzed. Our findings indicate that, although only a few companies carry out product and process innovation and especially product–service innovation, when they do, they have a positive effect on both productivity and environmental impact. However, this relationship is affected by the size of the company. Thus, the innovation strategies have a greater positive effect on environmental impact in large companies than companies with fewer than 50 employees. Finally, despite the importance of product–service innovation, it seems that this strategy is not yet established in Peruvian manufacturing companies. Given the positive effect on productivity and environmental impact, we conclude by emphasizing the importance of establishing public policies aimed at disseminating and promoting this type of innovation, with specific support for companies with fewer than 50 employees. Keywords: innovation strategies; productivity; environmental impact; manufacturing; size 1. Introduction In a broad sense, while sustainability has gained attention among organizations trying to combine economic, environmental, and social performance in their business strategy [ 1 ], its implementation has led to more involvement in complex global challenges, such as climate change or depletion of natural resources [ 2 ]. Traditionally, empirical evidence has shown that manufacturing companies consume many resources as a consequence of the traditional practices they follow in their production process [ 3 ]. However, it seems that industries in general are increasingly adopting strategies to be able to change this path and face the new challenges of society towards sustainability [ 4 , 5 ]. In this context, the role of manufacturing is key, not only because companies can achieve higher levels of productivity in the economy of a country, but they can promote major technological changes [ 6 ]. Recent studies highlight that manufacturers can change their production systems towards sustainability based on innovation [ 7 – 10 ]. Latterly, the focus has been on the paradigm shift towards the circular economy. This new framework establishes new principles for innovation towards regenerative production and consumption patterns, focusing on reducing the use of resources, extending the lifetime of products, their parts Sustainability 2021,13, 3289. https://doi.org/10.3390/su13063289 https://www.mdpi.com/journal/sustainability Sustainability 2021,13, 3289 2 of 18 and components, and eliminating waste and pollution [ 11 ]. In this sense, the manufacturing industry is called upon to innovate its products and processes, contributing to the realization of a circular economy and achieving economic benefits at the same time. The literature on innovation has normally focused on product and process innovation and their effects on economic performance [ 12 ], considering diverse indicators such as productivity [ 13 – 15 ] and environmental sustainability [ 16 , 17 ], among others. Recently, there has been growing interest in understanding how servitization or product–service innovation (PSI) can also have positive effects on the performance of manufacturing companies and achieve competitive advantages [ 18 , 19 ]. Some recent studies analyze the relationship between product–service innovation and productivity, finding that companies that implement servitization practices significantly increase their operating margins [ 20 ], sales [ 21 ] and employment [ 22 ], among other indicators. Furthermore, within the field of environmental studies, servitization is presented as a useful strategy to advance resource efficiency and reduce environmental impact [ 23 , 24 ]. That is, it appears to reduce environmental impact [ 11 ]. In this sense, innovation in business models through servitization is seen as an important strategy to contribute to a circular economy. However, servitization sometimes does not provide the expected benefits [ 25 ] and can increase operational and commercial risk [26]. Although many studies shed great light on the direct and individual effects of servitization within a company, very few still focus on the broader effects (e.g., environmental or social impacts). To address this gap, our article aims to empirically evaluate the effects of product–service innovation (and other traditional innovation strategies) on productivity and the environmental impact of the company, through a sample of 791 manufacturing companies in Peru. From a contextual perspective, the global added value of manufacturing has grown, strongly influenced by emerging and developing economies [ 27 ]. In this sense, this study focuses on Peruvian manufacturing to verify whether these companies also follow this path. In the last decade (2008–2018), the GDP of Peruvian manufacturing has experienced an annual growth rate of 2.3% and represented 13.3% of GDP in 2018. This trend has been accompanied by a large labor force (1.4 million workers in 2018), which constitutes an important source of employment [ 28 ]. Furthermore, another important aspect to highlight is that, over the last decade, progress towards a green industry has been on the public agenda. For example, with the National Productive Diversification Plan [ 29 ], strategies for the future of the industry were presented. Thus, a series of initiatives have been developed, such as the “Sustainable Public Procurement and Eco-labelling Project Aimed at SMEs” [ 30 ]. Similarly, to help preserve the environment, the Ministry of Production of Peru has been approving environmental impact studies, with the majority (91.8%) being manufacturing companies [ 28 ]. Despite all these initiatives for greener industry, the studies on PSI or servitization in Peru are still non-existent. The few studies that exist focus on the environmental impact of the extractive or mining industries [31]. Our original research design follows recent trends in servitization research [ 32 ], exploiting the information provided by the National Innovation Survey in the Manufacturing Industry of Peru to determine which manufacturing companies also offer services, with econometric regressions used on a sample of manufacturing companies that achieved product, process, and product–service innovations. The results show that all innovation strategies have positive effects on the productivity and environmental impact of manufacturing firms and that large companies have greater significant effects on the relationship between innovation strategies and productivity/environmental impact than small companies. This is particularly observed in large companies with product–service innovation, even though an exceedingly small proportion of companies carry out this innovation strategy. The paper is structured as follows: Section 2introduces the literature review and the development of some hypotheses; Section 3details the databases and tests the hypotheses; the empirical results are discussed in the Section 4; lastly, Section 5provides some brief conclusions, limitations, and suggestions for future avenues of research. Sustainability 2021,13, 3289 3 of 18 2. Literature Review and Hypothesis Development 2.1. Sustainability, Productivity and Environmental Impact in Manufacturing Firms Manufacturing industries play a pivotal role in the national economies of countries all around the world [ 33 ]. However, empirical evidence shows that the industrial sector consumes a huge quantity of natural resources and exerts considerable pressure on the environment due to the levels of pollution inherent to the production process [ 3 ]. During the last two decades, numerous studies have been developed to shed light on how manufacturing industries could transform their production systems in line with the aspirational targets of the Paris Agreement and sustainable development goals [ 5 ]. In this context, sustainability has become an imperative responsibility for the manufacturing industry to survive in contemporary society. This is due to the lack of a sustainability focus in traditional manufacturing practices [ 4 ] and the great pressure to reduce the overall manufacturing costs in order to sustain its position in hypercompetitive domestic and global markets [ 34 ]. Usually, an environmental assessment of manufacturing systems includes: fuel consumption, exhaust emissions and noise, air and water pollution, recycled materials after the manufacturing of non-reusable parts (including solid wastes such as metal products and paper products) and producing carbon emissions in manufacturing [ 35 ]. These practices could impact the organization or the business model in, for example, efficiency, productivity, profits, increased exports, etc. [ 36 ]. In addition, innovations might have a greater impact on the development of more sustainable production cycles, new products and services [ 37 ]. In this sense, innovation strategies should generate positive economic, social, and environmental results at the same time. However, those outcomes are not easy to establish given the uncertainties of the innovations [ 38 ]. In any case, although researchers have broadly discussed issues related to sustainability-oriented innovation, there is a lack of consensus on the empirical evidence for these relationships [36]. Many studies highlight the importance of innovation for sustainability. In particular, there are studies that address the transformation from innovation to sustainability [ 8 ]; service innovation in sustainable product–service systems [ 9 , 10 ]; green servitization for sustainable supply chain operation [39]; innovation in the circular and performance economy [ 40 ], among other topics. In recent decades, there has been a growing interest in eco-innovation as a type of innovation that allows for both economic and environmental benefits [ 41 – 44 ]. Thus, for companies that eco-innovate, it would be possible to achieve a win–win situation in terms of competitiveness and sustainability. An eco-innovation is simply defined as “an innovation that improves environmental performance”, although “economic and social impacts play a crucial role in its development and application, and hence determine its diffusion path and contribution to competitiveness and overall sustainability” [ 42 ]. An eco-innovation may happen at different levels through products, processes, marketing methods, organizations and institutions, and thus produce anything from incremental to disruptive and radical impacts [45]. 2.2. Manufacturing Innovation Strategies Traditionally, manufacturing innovation strategies are related to technological (product and process) and non-technological (organizational and marketing) aspects that can affect the performance of an organization [ 46 ]. However, technological innovations are the most common in manufacturing industries. Thus, product innovations are considered improvements, as is the introduction of a new product or service to meet the needs of external markets. In other words, product innovation is the introduction of a good or service that is new or significantly improved with respect to its technical specifications, functional characteristics, product attributes, design, materials, components, embedded software, etc. It can also consist of improving the reliability of the product to meet customer requirements or market needs. Therefore, the objective of product innovation is to improve the quality and the brand of the company from the differentiation and positioning of its products in the market. It is important to highlight that product innovation can be accompanied by process innovations, new organizational forms, and marketing [ 47 ]. Process Sustainability 2021,13, 3289 4 of 18 innovations are, on the other hand, considered as new or improved processes; from the implementation of new machinery to the incorporation of quality systems, among other activities, with the aim to reduce unit production and distribution costs and to diversify the company’s product offering. Therefore, process innovation can facilitate greater flexibility in production and product quality, as well as improve working conditions for employees and meet environmental requirements. On the other hand, process innovations, in addition to focusing on production or distribution processes, also focuses on support processes (purchasing, accounting, maintenance) using computer programs (such as ERP or SAP) that articulate different areas of the organization improving their effectiveness and productivity. Therefore, significant changes in techniques, equipment, management software are considered, which could be linked to organizational innovation [47]. There is ample evidence that both product and process innovation influence firm productivity, also in the Latin American context [ 14 ]. Productivity gains are related to production efficiency and factor savings. Some studies indicate that product innovation has a positive effect on revenues, somewhat less evident in process innovation [ 15 ]. The literature on product and process innovation has normally focused on the effects these outcomes have on the economic performance of the organization [ 12 ], such as productivity [ 13 – 15 ] or even how to achieve its sustainable competitive advantage. Under this idea, many organizations have not considered environmental and social factors [ 7 ]. In fact, some research highlights the disadvantages of innovation [ 48 ]. However, more and more, the literature on product and process innovation begins to show evidence that organizations are beginning to become aware of environmental sustainability [ 16 ]. Recent studies highlight that the development of digital technologies and the emergence of sustainable smart products has attracted great attention from industries and ecosystems [ 49 ]. Based on this discussion, we make the following hypotheses: Hypothesis 1a (H1a). Manufacturing firms that implement product innovations have a positive effect on the productivity of the firm. Hypothesis 1b (H1b). Manufacturing firms that implement product innovations have a positive effect on the environmental impact of the firm. Hypothesis 2a (H2a). Manufacturing firms that implement process innovations have a positive effect on the productivity of the firm. Hypothesis 2b (H2b). Manufacturing firms that implement process innovations have a positive effect on the environmental impact of the firm. Despite the traditional classification, one of the most recent innovations among manufacturing industries is the addition of value by incorporating services to their core corporate offerings [ 50 ]. This phenomenon is also known as servitization, or product–service innovation (PSI). In fact, manufacturing firms are progressively innovating in services to escape the commodity trap and gain competitive advantage [ 18 ]. Thus, we consider it convenient to analyze this strategy independently. The marketing and management literature highlights the potential of servitization as a strategy to improve the competitiveness of companies [ 20 ]. The motivations that guide manufacturing companies to shift to the provision of product–services are: the need to halt the reduction of profits and to escape the lack of a differentiation trap [ 50 ]. From this point of view, servitization is a viable way to improve the economic performance of companies through different mechanisms. It is stated that servitization allows companies to set barriers to competitors and others, to lock-in customers, to differentiate the market offers and to diffuse innovations, as well as to get relevant information from the customers that is needed for further innovation. Additionally, other reasons that favor the offering of services are: the greater financial margin and stability of gains along the economic cycle, the trend towards outsourcing in Sustainability 2021,13, 3289 5 of 18 the market due to the need for flexibility and to the technological complexities that other organizations face, as well as the differentiation value of services [50]. On the other hand, the shift to PSI requires manufacturing companies to address organizational and managerial challenges [ 22 ], while different conditions may favour or hinder it [ 51 – 53 ]. Moreover, the shift to servitization sometimes does not provide the expected benefits. Neely [ 25 ] highlights important challenges for companies and the “servitization paradox”—when servitized companies generate lower profits as a percentage of revenues compared with purely manufacturing companies [ 26 ]. Other authors point out that the diffusion depends on the stage of maturity of the industry, the life cycle of the product [ 54 ], broader changes in the socio-technical context, or customer behavior, etc. Thus, services may serve to create economic and social value. More recently, it has been argued that the sustainability challenge will be a key driver of future developments in service activities [ 55 , 56 ]: first, new services may be created based on a new economic model, supporting primary and manufacturing activities that are organized in the local economy and the new needs appearing in that context; second, services may be innovative and have fewer impacts on the environment by themselves. From this viewpoint, the servitization strategy may support companies in achieving environmental objectives, which are beneficial for them and for their customers, and eventually for society. Within the field of environmental studies, servitization is presented as a useful strategy to make progress in resource efficiency and diminishing the environmental impact of economic activities [ 23 , 24 ]. A product–service system should be defined as “a system of products, services, supporting networks and infrastructure that is designed to be: competitive, satisfying to customer needs and having a lower environmental impact than traditional business models” [24]. In recent literature on the circular economy and resource efficiency, great emphasis is placed on the innovation of business models towards the provision of services or products as a service [ 57 – 60 ]. According to the literature, the business models based on selling goods as services or performance are the most profitable and resource-efficient in the circular economy. Through its focus on system solutions, they internalize risk and waste costs. Moreover, the retention of ownership of goods and embedded resources creates corporate and national security of resources. Therefore, the design of eco-efficient product–service systems sets the basis for re-thinking servitization as an innovation that goes further than economic gains for the companies and provides societal benefits. Some specific case studies have been carried out which show how different servitization examples contribute to improving environmental performance through several indicators [ 58 ] and has been constructed in different ways [ 61 ]. Neely [ 25 ] employs a rank of service activities to distinguish between servitized and purely manufacturing firms. In previous studies on the impact of servitization, measures to evaluate economic performance included the indicator ‘EBIT margin’ and ‘Tobin’s q’ to assess the effectiveness of the service business model innovation employed [ 62 ], among others. The indicators for measuring the environmental impact of the service strategy are also varied. Life Cycle Assessment (LCA) is one of the usual methods used to compare product–service systems with equivalent single products [ 63 ]; other indicators include corporate environmental footprint [ 64 , 65 ]. Despite existing evidence, services in general, and servitization in particular, are not inherently more environmentally friendly than conventional product-based business models [ 66 ]. This points out the need for purposely innovating towards environmental servitization. Investment in servitization produces a variety of effects. In other words, there is no agreement that the effects of servitization are always positive from an environmental or sustainability perspective [ 20 , 57 , 61 ]. This directs our study to a novel approach that focuses on data on innovation. Based on this evidence, we make the following hypotheses: Hypothesis 3a (H3a). Manufacturing firms that implement product–service innovations have a positive effect on the productivity of the firm. Hypothesis 3b (H3b). Manufacturing firms that implement product–service innovations have a positive effect on the environmental impact of the firm. Sustainability 2021,13, 3289 6 of 18 2.3. Firm Size, Innovation, Productivity and Environmental Impact The review of the empirical literature on the relationship between innovation, productivity, environmental impact, and company size is not immune to divergences that bring about debates that ultimately advance the understanding of this study phenomenon. Firstly, in the literature on innovation, traditionally the Schumpeterian approach has “dominated”, since it is based on the hypothesis that innovations are fundamentally promoted by large companies. On this basis, subsequent studies reinforce this idea and suggest that large companies invest more in R&D [ 67 ] and, therefore, are more likely to have a greater absorption capacity than SMEs [ 68 ]. In this way, large companies have greater opportunities to capitalize on their resources and capabilities [ 69 ] and thus develop new products [ 70 ]. This advantage is usually prolonged due to multiple factors, such as better access to external capital and hiring highly qualified personnel, etc. [ 67 ]. In contrast, other studies suggest that SMEs can be more innovative [ 71 ] because they are proactive in the search and use of external knowledge [ 72 ], they are more flexible in their structure and adapt to market demands [ 73 ] and are effective in co-ordinating their resources in the development of new products [74]. Secondly, in the sustainability literature, it can be general stated that all companies can generate impacts throughout the entire life cycle of a product. However, SMEs play an important role in this context since they represent most existing companies [ 75 ], face a series of difficulties in integrating sustainability into their core business processes and remain largely reactive to environmental issues [ 34 ]. Moreover, research on firm size and eco-innovation also points to the importance of being a large company in order to take on environmental objectives of innovation [ 44 ]. Przychodzen and Przychodzen [ 76 ] suggest that larger companies exhibit more eco-innovative behavior due to having more free cash resources and having less exposure to financial risk. Arranz et al. [ 77 ] reach a similar conclusion when they find that large companies have a greater predisposition for the adoption of environmental objectives. However, some evidence in emerging countries has shown that innovative manufacturing SMEs present performance benefits from ecoinnovation [ 78 ]. Therefore, based on all the reviewed literature, we propose the following hypotheses: Hypothesis 4a (H4a). Firm size has a positive effect on the relationship between manufacturing innovation strategies and the productivity of the firm. Hypothesis 4b (H4b). Firm size has a positive effect on the relationship between manufacturing innovation strategies and the environmental impact of the firm. 2.4. Innovation, Sustainability and Productivity in Developing Economies Sustainable production and consumption are a major challenge for businesses around the world, especially for emerging and developing countries [ 79 ]. Beyond the policies that can influence how industries and companies develop innovations for a more sustainable production and consumption model, it is interesting to analyze the efforts put in place by companies themselves. In this sense, it has been suggested that sustainable production and consumption strategies can affect sales performance; therefore, our research on innovation strategies and their impacts on economic and environmental objectives of firms is of utmost interest. Among the studies that focus on the Latin American context, it has been shown that small and medium-sized enterprises have lower productivity levels than SMEs in developed economies. In fact, it has been shown that manufacturing SMEs with a strong export focus, especially those that manage to join global value chains, achieve productivity improvements. This relationship would be due to greater exposure to best practices and frontier technologies, compared to firms that remain focused on domestic markets [ 80 ]. Another study, which focused on analyzing the interaction between knowledge management competencies, firm internationalization and productivity in African countries, also found Sustainability 2021,13, 3289 7 of 18 significant differences between exporting and non-exporting firms (specifically, service and signaling competencies which are conditioned by firms’ relationship with exporting). Therefore, exporting firms need to create a knowledge-intensive inter-firm network to improve their business models; this leads to higher productivity levels [ 81 ]. In contrast, the authors suggest that African firms focused on domestic markets need to improve their organizational absorptive capacity before turning to external technology and service providers. Without such absorptive capacity, the impact of external suppliers is likely to lower the productivity of non-exporting firms in this context. In addition to the differential impact on the productivity of developing country firms according to their market orientation, it is relevant for the purpose of this article to analyze previous evidence on eco-innovation in developing countries. The literature on eco-innovation or environmentally positive innovation is abundant in the context of developed economies. However, it is not clear that the same factors and effects are equally applicable to firms in emerging markets and low-income countries [ 82 ]. Recent studies have found that the main barriers to eco-innovation are related to uncertain market demand, high investment costs, lack of knowledge and financial resources, poor co-operation between firms, government agencies and academia, and lack of skilled personnel and R&D investment [ 82 , 83 ]. Meanwhile, in low-income countries, subsidies, R&D spending, access to formal sources of knowledge, co-operation with external agents, and spending on staff training are critical factors in driving eco-innovation [84]. The achievement of environmental objectives through innovation varies greatly depending on the characteristics of firms in developing countries themselves. For example, in a study for Brazil [ 83 ], it is shown that multinational companies in advanced sectors, such as electronics, information technologies and automotive industries, develop their product innovations in research centers abroad while maintaining little co-operation with local authorities. On the other hand, micro and small enterprises are based on extractive processes and have little management capacity to develop innovations, as well as difficult access to finance. In any case, the determinants and preconditions to innovation are remarkably different among Latin American countries [ 85 ]. Some authors state that this region serves as a “natural laboratory” for testing existing theories originating from the USA and Europe [ 86 ] and argue that Latin America is an under-researched region that has the potential to yield new and important insights into the innovation and internationalization of firms [ 87 ]. Thus, this literature review justifies the present study as we address a complementary perspective on innovation strategies and the effects on productivity and environmental performance of firms in developing countries. In contrast to the previous literature, the aim is to analyze specifically innovative firms and to determine which of the innovation strategies result in better economic and environmental performance. Figure 1presents the hypotheses formulated in a theoretical model. Sustainability 2021,13, 3289 8 of 18 Sustainability 2021, 13, x FOR PEER REVIEW 8 of 19 Figure 1. Theoretical model. 3. Method 3.1. Data Description The data were obtained from the National Innovation Survey in the Manufacturing Industries of Peru (ENIIM). The ENIIM data are collected by the Peruvian Institute of Statistics and Informatics every three years. The ENIIM uses stratified random sampling by localization, firm size, and industry. The final sample of this survey consisted of 1541 manufacturing firms distributed in small companies (29.7%), medium-sized companies (5.5%) and large companies (64.8%). The sample was obtained from the total population of 188,650 firms in Peru [75]. Our study uses information available from the third survey and covers the period from 2015 to 2017. For its part, the information was collected through direct face-to-face surveys, which involved the participation of an officially qualified pollster and informants who were the firm’s managers or owners. In accordance with our research objectives (to know whether innovation strategies affect the productivity and environmental impact of manufacturing firms), we focused on Chapter VII of the ENIIM that deals with innovation outcomes (a detailed version of the survey and questionnaire is available by this link http://iinei.inei.gob.pe/microdatos/ (accessed on 20 July 2020)). Thus, the study focused only on companies that are engaged in product, process, and service innovation. For instance, the survey includes the following questions: (1) “During the 2015–2017 period, in relation to product innovations, did the company manage to introduce a new or significantly improved product to the market?”; (2) “During the 2015–2017 period, in relation to process innovations, did the company manage to introduce a new or significantly improved process into the company?”; (3) “During the 2015–2017 period, in relation to service innovations, did the company manage to introduce a new or significantly improved service to the market?”. As such, we take product innovators to be those companies that responded positively to the introduction of product innovations, but negatively to service and process innovations. Likewise, we consider process innovators to be those companies that responded positively to the introduction of process innovations, but negatively to product and service innovations. Lastly, we take product–service innovators to be those companies that responded positively to the introduction of both product and service innovations together. Using these criteria, we included 791 companies in our total sample (Table 1), 266 being <50 employees and 525 ≥ 50 employees. ENVIRONMENTAL IMPACT PRODUCTIVITY FIRM’S PERFORMANCE Product Innovation Process Innovation Product-service Innovation MANUFACTURING INNOVATION STRATEGIES H2 H1 H3 H4 ≥ 50 Employees < 50 Employees MANUFACTURING FIRM’S SIZE Figure 1. Theoretical model. 3. Method 3.1. Data Description The data were obtained from the National Innovation Survey in the Manufacturing Industries of Peru (ENIIM). The ENIIM data are collected by the Peruvian Institute of Statistics and Informatics every three years. The ENIIM uses stratified random sampling by localization, firm size, and industry. The final sample of this survey consisted of 1541 manufacturing firms distributed in small companies (29.7%), medium-sized companies (5.5%) and large companies (64.8%). The sample was obtained from the total population of 188,650 firms in Peru [ 75 ]. Our study uses information available from the third survey and covers the period from 2015 to 2017. For its part, the information was collected through direct face-to-face surveys, which involved the participation of an officially qualified pollster and informants who were the firm’s managers or owners. In accordance with our research objectives (to know whether innovation strategies affect the productivity and environmental impact of manufacturing firms), we focused on Chapter VII of the ENIIM that deals with innovation outcomes (a detailed version of the survey and questionnaire is available by this link http://iinei.inei.gob.pe/microdatos/ (accessed on 20 July 2020)). Thus, the study focused only on companies that are engaged in product, process, and service innovation. For instance, the survey includes the following questions: (1) “During the 2015–2017 period, in relation to product innovations, did the company manage to introduce a new or significantly improved product to the market?”; (2) “During the 2015–2017 period, in relation to process innovations, did the company manage to introduce a new or significantly improved process into the company?”; (3) “During the 2015–2017 period, in relation to service innovations, did the company manage to introduce a new or significantly improved service to the market?”. As such, we take product innovators to be those companies that responded positively to the introduction of product innovations, but negatively to service and process innovations. Likewise, we consider process innovators to be those companies that responded positively to the introduction of process innovations, but negatively to product and service innovations. Lastly, we take product–service innovators to be those companies that responded positively to the introduction of both product and service innovations together. Using these criteria, we included 791 companies in our total sample (Table 1), 266 being <50 employees and 525 ≥50 employees. Sustainability 2021,13, 3289 9 of 18 Table 1. Sample composition by industry and size (in absolute and in percentage). Industry Absolute Percentage <50 Employees ≥50 Employees <50 Employees ≥50 Employees Food products processing 30 105 11.28% 20.00% Beverage manufacturing 5 10 1.88% 1.90% Manufacture of textile products 12 38 4.51% 7.24% Garment manufacturing 20 26 7.52% 4.95% Manufacture of leather products and related products 14 13 5.26% 2.48% Wood production and manufacture of wood and cork products 13 11 4.89% 2.10% Manufacture of paper and related products 7 16 2.63% 3.05% Printing and playback of recordings 14 15 5.26% 2.86% Manufacture of coke and petroleum refining products 3 5 1.13% 0.95% Manufacture of chemical substances and products 18 49 6.77% 9.33% Manufacture of pharmaceutical products, medicinal chemicals 8 16 3.01% 3.05% Manufacture of rubber and plastic products 19 50 7.14% 9.52% Manufacture of other non-metallic mineral products 7 29 2.63% 5.52% Manufacture of common metals 7 10 2.63% 1.90% Manufacture of fabricated metal products, except machinery 18 54 6.77% 10.29% Manufacture of computer products, electronics, and optics 4 2 1.50% 0.38% Electrical equipment manufacturing 7 17 2.63% 3.24% Manufacture of machinery and equipment n.c.p. 14 16 5.26% 3.05% Manufacture of motor vehicles, trailers, and semi-trailers 8 9 3.01% 1.71% Manufacture of other transport equipment 3 5 1.13% 0.95% Furniture manufacturing 17 7 6.39% 1.33% Other manufacturing industries 9 13 3.38% 2.48% Repair and installation of machinery and equipment 9 9 3.38% 1.71% Total 266 525 100% 100% Source: Own elaboration from ENIIM Database (2018). 3.2. Variables Based on the comprehensive questionnaires, two groups of variables could be observed. The first set of variables deals with firms’ performance indicators such as productivity and environmental impact, while the second groups of variables deal with manufacturing innovation strategies. Thus, some of the main descriptions and a correlation matrix are shown in Table 2. Given the nature of the variables, the Spearman method was applied to calculate the correlations. Table 2. Descriptive statistics and correlation matrix for the variables of interest. Variable Mean SD Min Max (1) (2) (3) (4) (5) Productivity (1) 1.64 1.14 0 3 1 Environmental Impact (2) 1.46 1.20 0 3 0.47 * 1 Product Innovation (3) 0.31 0.46 0 1 0.15 * 0.10 * 1 Product–Service Innovation (PSI) (4) 0.40 0.56 0 2 0.04 0.14 * 0.05 1 Process Innovation (5) 0.61 0.49 0 1 0.29 * 0.23 * 0.02 0.05 1 Size 322.74 921.46 1 14447 0.07 * 0.12 *** 0.08 ** 0.08 * 0.07 * Total number of valid observations for all variables is 352. (*) denotes statistical significance at 5% (p-value < 0.05), ** p< 0.01, *** p< 0.001. To make a profile of the firm in our sample, we grouped companies together according to their innovation strategies, namely: product, process, and product–service innovation (PSI). This was fundamentally because innovation strategies are considered especially important in shaping the innovation portfolio of modern manufacturing companies [ 19 ]. In addition, we considered two size categories depending on the number of employees in the firm. The first group was made up of those manufacturers that have less than 50 employees and the second group consisted of those manufacturers that have more than 50 employees. Despite this, there were difficulties which arose around how to define the key variables of our study, productivity and environmental impact, which have the role of dependent variables in our study. 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