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Over the past decade, sustainable innovation has occupied a top-ranking position on the agenda of many firms. Sustainable innovation can be broadly defined as an innovation that has to consider environmental and social issues as well as the needs of future generations. Although sustainable innovation provides considerable new opportunities for companies it goes along with an increased complexity. This in turn requires certain organizational routines and capabilities to deal with the upcoming challenges. We explore what the specific driving forces are that increase the degree of sustainable innovation within a firm's innovation activities. We test them empirically for more than 1,100 firms in Germany and find that firms need to invest in internal absorptive capacities and to draw both broadly and deeply from external sources for innovation. In that sense, investments in employee training turn out to be more important than technological R&D expenditures.

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The shift towards more open and interconnected innovation activities has been a major topic in recent academic and practitioner discussions. Firms must connect their in-house R&D activities with external partners, such as leading customers or universities, to increase the effectiveness of their innovation activities. Hence, management needs to define where to search for valuable knowledge in its environment. In this paper we argue that knowledge search has to reflect the heterogeneity of various knowledge sources with regard to the knowledge they can provide and how these sources can be activated. We hypothesize that search strategies driven by science, suppliers and the product market will contribute differently to innovation success with new-to-market versus imitated products. Moreover, we explore the effect of these types of knowledge search within different sectoral patterns of innovation. Our empirical analysis rests on a sample of almost 5,000 firms from five Western European countries. The results support our hypotheses and highlight the potentials and shortcomings of different types of knowledge search.

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Searching for external knowledge has frequently been characterized as crucial for firm success. However, little is known about how the direction of search strategies influences innovation performance. In this paper, we argue that firms need to specialize their search strategy and that its effectiveness is moderated by research and development (R&D) investments and potential knowledge spillovers from a firm's environment. Based on a sample of >5,000 firms from five European countries, our results show that being open for innovation generally pays off. However, both moderating factors have a crucial role to play: on the one hand, in‐house R&D investments are most effective when combined with a market‐oriented search strategy. On the other hand, a technologically advanced environment requires firms to reach out to sources of scientific knowledge in order to access highly novel knowledge and to enhance innovation performance. We develop targeted management recommendations based on these results.

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