<p>This study aims to evaluate the influence of energy policies, obstacles in the industrial setting, and market competitiveness on firm innovation along with the mediating role of managerial strategies based on the dynamic capabilities, resource-based view, and exogenous growth theories. This study extracts data from the World Bank Enterprise Survey 2019 to examine the association among defined factors. The derived data were analyzed through Partial Least Square Structural Equation Modelling (PLS-SEM) to draw the image of results. The outcomes reveal that managerial strategies have mediating role between external determinants and firm innovation in Greece, Italy, and Turkey. Meanwhile, market competitiveness and energy policies have positive significant impacts on firm innovation and managerial strategies. Surprisingly, the obstacles in industrial setting have non-significant effects on firm innovation in Greece but positive significant effects in Italy and Turkey. These outcomes provide the theoretical foundations for environmental-based firm innovation strategies. It offers a profound understanding of external determinants in the light of managerial strategies as a novel precursor for the environment friendly business practices based on the dynamic capabilities, resource-based view, and exogenous growth theories.</p>