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Abstract This paper investigates the incentives and inhibiting factors of eco-innovation capacities in the firm. Firms materialize the objectives of eco-innovation from a reactive attitude to external pressures, to a more proactive attitude that implies the voluntary incorporation of eco-innovation activities. This variability in the behaviour of companies with respect to the level of eco-innovation development has been a motivator for the research. However, despite the importance of this research question, this has been approached in a dispersed way from multiple approaches. From a dynamic capabilities perspective, we assume that the innovation capacity of the firm encourages eco-innovations. Our paper is focused on the process of eco-innovation, identifying the elements that facilitate or hinder the eco-innovation in the firm. We study the Spanish case, using a panel from the Spanish Innovation Survey, with a sample of 5461 Spanish firms. The results highlight that the complexity of the eco-innovation process negatively affects the decision to develop eco-innovations. However, our results suggest that institutions and organizations of the Spanish environment are making efforts to compensate these obstacles and provide incentives to develop eco-innovations. Highlights • We model investigates the incentives and inhibiting factors of eco-innovation. • Our focus is on the process of eco-innovation from dynamic capabilities perspective. • The complexity of the eco-innovation process negatively affects to develop eco-innovations. • Results show that the experience facilitates the development of future eco-innovations. • The institutions provide incentives to develop eco-innovations. [ABSTRACT FROM AUTHOR]