This　study　sheds　light　on　the　driving　forces　of　eco-innovation　and　the　effects　on　firm　performance.　We　focus　on　eco-innovation,　which　provides　customer　and　business　value,　and　contributes　to　sustainable　development　while　decreasing　environmental　costs　and　impacts.　The　study　uses　data　collected　from　442　Chinese　firms　to　investigate　the　relationship　among　the　drivers,　eco-innovation　behavior,　and　firm　performance.　The　results　reveal　that　certain　factors　(i.e.,　technological　capabilities,　environmental　organizational　capabilities,　a　market-based　instrument,　competitive　pressures,　and　customer　green　demand)　contribute　to　the　development　of　eco-innovation.　Competitive　pressure　provides　firms　with　the　greatest　incentive　to　adopt　eco-innovation,　followed　by　a　market-based　instrument,　technological　capabilities,　customer　green　demand,　and　environmental　organization　capabilities.　The　market-based　instrument　is　effective　in　inducing　eco-innovation,　while　a　command　and　control　instrument　does　not.　With　regard　to　the　adoption　of　eco-innovation,　we　show　that　eco-innovation　behavior　can　significantly　enhance　a　firm＇s　environmental　performance,　and,　through　environmental　performance,　has　an　indirect　positive　impact　on　its　economic　performance.　These　findings　support　the　“Porter　hypothesis,”　and　have　several　implications　for　both　policy　makers　and　business　managers.　©　2017　Elsevier　Ltd