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Sustainability Orientation, Green Supplier Involvement, and Green Innovation Performance: Evidence from Diversifying Green Entrants

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Abstract

While green innovation has a positive impact on firms’ performance, some established firms that initiate green innovation activities (referring to diversifying green entrants) could suffer from insufficient new green knowledge and skills. Since adopting a sustainability orientation helps firms commit to the creation of superior sustainable practices, and efficiently invest resources necessary to develop appropriate new green products, leading to superior green innovation performance, sustainability orientation offers an alternative approach for diversifying green entrants to achieve green innovation success. Building on resource-based, knowledge-based, and capabilities theories, this study aims to identify key factors that enable sustainability orientation of diversifying green entrants and enhance its effect on green innovation performance. As sustainability issues frequently occur upstream at the supplier level, and since supplier involvement effectively determines new product success, this study theorizes that diversifying green entrants that adopt sustainability orientation require two types of green supplier involvement (as a knowledge source and a co-creator) to enhance the effect of sustainability orientation on green innovation performance. Green knowledge-processing capability and green R&D capability complement green supplier involvement as a knowledge source and green supplier involvement as a co-creator, respectively, to further enhance the amount of green innovation performance. Based on a longitudinal dataset of 336 diversifying green entrants, the results support all our hypotheses. Interestingly, an additional analysis suggests that when diversifying green entrants implement green supplier involvement as a co-creator, they achieve greater green innovation performance than those who implement green supplier involvement as a knowledge source. These findings provide important theoretical implications and practical guidance for established firms to pursue green innovation.

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Notes

  1. Diversifying green entrants are different from green start-ups, for which survival and growth-related practices are embedded in green technologies and capabilities when founded.

  2. The authors thank one of the JBE reviewers for this helpful suggestion.

  3. One-step process: both the measurement and structural effects are simultaneously estimated (Fornell and Yi 1992). Two-step process: step 1 is to estimate the measurement model with no structural effects using confirmatory factor modeling. Step 2 is to estimate the structural section of the model using the results from step 1.

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  1. Department of Business Administration, National Taipei University, 151, University Rd., San Shia District, New Taipei City, Taiwan, ROC

    Colin C. J. Cheng

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Correspondence to Colin C. J. Cheng.

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Cheng, C.C.J. Sustainability Orientation, Green Supplier Involvement, and Green Innovation Performance: Evidence from Diversifying Green Entrants. J Bus Ethics 161, 393–414 (2020). https://doi.org/10.1007/s10551-018-3946-7

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