Abstract
Over the past two decades, since the emergence of the triple bottom line philosophy, the relationship between environmental sustainability and corporate performance has received a lot of attention, but has generated mixed or often even contradictory results. A few recent studies have inferred that innovations are the missing link that connects the environmental sustainability of a firm to other performance metrics; however, the evidence of such a proposition has been restricted to being conceptual or anecdotal. Relying on a knowledge governance approach, this study presents exploratory empirical evidence indicating that the impacts of a firm’s sustainability initiatives on its innovation performance originate from the governance mechanism it uses for sustainability, not sustainability outcomes per se. We tested this research proposition by using a subsample of Global Manufacturing Research Group’s global survey data. Our results support the positive impacts of two widely-used environmental sustainability governance mechanisms (i.e., internal monitoring and supplier collaboration) on product innovation capability. The findings further provide more useful and effective options for manufacturing firms and managers, to establish environmental sustainability governance mechanisms that can be converted into product innovation capability.
Highlights
The importance of sustainable manufacturing has become undeniable
The impacts of internal monitoring and supplier collaboration for environmental sustainability (ES) on product innovation capability have been found to be positively significant, and the results are robust across both Heckman’s approach and the ordinary least squares (OLS) model. These findings provide early empirical evidence on our two important theoretical arguments: (1) a firm’s ES will be converted into an economic dimension through its innovation capabilities; and (2) such capabilities are not from its ES outcomes, but from the governance mechanisms established to achieve those outcomes
Future research may benefit from considering this type of governance mechanism based on dyadic data from both partnering firms
Summary
The importance of sustainable manufacturing has become undeniable. Many leading manufacturers such as Hewlett-Packard, IKEA, and Ford have actively attempted to incorporate environmental sustainability (ES) into their supply chains [1,2]. As per the latest statistics, the world’s 250 largest companies, by revenue, publish corporate responsibility reports on a regular basis to meet heightened consumer expectations on sustainable economic development [3]. Despite two decades of research, the direct causation between ES and firm performance is still obscure and not well understood, with mixed findings [5]. The opposite research stream, including Wiengarten and Pagell [8] and Wiengarten et al [9], explored the question of “how to achieve ES?” and found that environmental performance of a firm was improved only under
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