Innovation Drivers for Emerging Economies: Evidence of Dual Transition in Bangladesh

Abstract

This study applies the knowledge production function framework to examine the influence of supply- and demand-side factors on firm-level innovation in Bangladesh, using firm-level data from the World Bank Enterprise Survey. The result of a logistic regression model reveals that management practice, Information and Communication Technologies adoption, environmentally responsible behaviour and standardization significantly increase the likelihood of innovation. The findings underscore the importance of both technological capabilities and sustainability-oriented practices in shaping innovation outcomes. The study identifies a ‘dual transition’, wherein firms simultaneously pursue digital and environmental advancements, raising critical questions about its necessity for innovation in developing economies. Institutional support, regulatory quality and internal firm capabilities emerge as key enablers. These results provide actionable insights for policymakers to design targeted interventions that foster ICT integration, formal management systems and sustainable business practices, thereby enhancing innovation and supporting long-term economic growth in Bangladesh and other comparable contexts. © 2025 Elsevier B.V., All rights reserved.