Do Clean Energy and Financial Innovation Induce SME Performance? Clarifying the Nexus between Financial Innovation, Technological Innovation, Clean Energy, Environmental Degradation, and SMEs Performance in Bangladesh

Abstract

The economic contribution of small and medium enterprises (SMEs) has been well appreciated and documented in the literature. On the other hand, another domain of studies has concentrated on discovering the key determinants of SMEs' growth and survival. The motivation of the study is to gauge the nexus between financial innovation, technological innovation, clean energy, environmental degradation, and SME performance in Bangladesh for the period 1991-2019. The study has implemented Autoregressive Distributed Lagged (ARDL), Nonlinear ARDL, and the Toda-Yamamoto causality test. Referring to output derived with ARDL, a study has exposed a positive and statistically significant link between explanatory variables, that is, financial innovation, technological innovation, and clean energy consumption and SMEs' contribution to GDP both in the long-run and short-run. At the same time, environmental degradation has been revealed to be adversely connected to SME performance. The results of the standard Wald test have established an asymmetric association between explained and explanatory variables in the long-run and short run. In terms of the directional causality test, the study disclosed bidirectional causal effects running between clean energy and SMEs performance [CEßàSME], foreign direct investment, and SMEs performance [FDIßàSME]. Based on the study findings, the policy suggestions have been introduced in light of future development in SMEs in Bangladesh.