Sustainability‐oriented capabilities for eco‐innovation: Meeting the regulatory, technology, and market demands

Abstract

Despite consensus in the literature that regulation, technology push, and market pull drive eco-innovation (EI), evidence remains limited on the diverse firm capabilities needed to boost EI. Building on the natural-resource-based view of the firm and the EI literature, this paper posits that firms need to renew and realign their capabilities, and ultimately develop distinctive sustainability-oriented capabilities, in order to meet the rapidly changing regulatory, technology, and market demands. Results of the analysis, based on a survey of U.K. firms, reveal that EIs are more likely to arise when firms (a) build capabilities on voluntary self-regulation (i.e., executive driven environmental management system and corporate social responsibility) because such organizational capabilities allow them to address increasing regulatory pressures; (b) invest in environmental research and development (i.e., eco-R&D)-instead of generic research and development-because it provides them with the relevant and specific technological capabilities to tackle technology shifts towards sustainability; and (c) develop capabilities in green market sensing as such capabilities allow them to address green consumption needs.

Eco‐innovation and firm growth in the circular economy: Evidence from European small‐ and medium‐sized enterprises

“…The positive impact of eco‐design on firm growth is argued to result from a combination of energy/materials‐based cost savings due to more eco‐efficient design, increased revenues due to satisfying green consumer demand and increased firm competitiveness due to the improved public image and regulatory compliance records of the firm (Plouffe, Lanoie, Berneman, & Vernier, ). Eco‐design capabilities are important sustainability‐oriented capabilities (Demirel & Kesidou, ) that are strongly correlated with SMEs' ability to introduce EI and business model innovations (Ghisetti & Montresor, ; Prendeville, O'Connor, Bocken, & Bakker, ). Our findings extend this notion by demonstrating that eco‐design also contributes to SME growth and therefore point to the importance of raising the eco‐design capabilities of SMEs in order to enhance their integration to the CE.…”

“…The types of circular EI included in the model are EI with a focus on (1) replanning of water usage to minimize use and maximize reuse (WATER), (2) using renewable energy (RENEWABLE), (3) replanning energy usage to minimize use (ENERGY), (4) minimizing waste by recycling, reusing, or selling to another company (WASTE), and (5) redesigning products and services to minimize the use of materials or use recycled materials (ECO‐DESIGN). The first four types (1)–(4) of circular EI are typical examples of process EI that utilize the principles of subsystem change or system change in order to increase the eco‐effectiveness of the operations (Demirel & Kesidou, ; Kiefer, González, & Carrillo‐Hermosilla, ). The fifth category, ECO‐DESIGN, on the other hand, is typically considered a form of product EI.…”

Business model based on strong sustainability: Insights from an empirical study

“…One such example is how the SBM framework of Bocken et al (2014) infused sustainability into the traditional TBM of business model canvas (Osterwalder & Pigneur, ). Other authors have proposed the development of sustainability‐oriented capabilities that propel such innovation (Demirel & Kesidou, ). The SBM archetypes (Ritala et al, ) stem from the major innovation types necessary to reach sustainability.…”

Innovation as a driver of eco‐innovation in the firm: An approach from the dynamic capabilities theory

“…Recent literature has investigated the explanatory variables for eco‐innovation drivers (Costantini, Crespi, & Palma, ; Dangelico, Pujari, & Pontrandolfo, ; Del Río, Peñasco, & Romero‐Jordán, ; Horbach, Rammer, & Rennings, ; Novellie, Biggs, & Roux, ; Triguero, Mondéjar, & Davia, ; Zubeltzu‐Jaka, Erauskin‐Tolosa, & Heras‐Saizarbitoria, ). Demirel and Kesidou () recognise that there is a consensus in this literature regarding regulation, technology push, and market pull as drivers of eco‐innovation, whereas in contrast, there is a lack of agreement on the role firms' capabilities play in fostering eco‐innovation. Therefore, Hofman et al, () point out that exploration of which capabilities are antecedents of the implementation of eco‐innovation is a fundamental question for understanding eco‐innovation, and Demirel and Kesidou also highlight the dearth of empirical evidence in this topic.…”