Elsevier

Journal of Cleaner Production

Volume 64, 1 February 2014, Pages 81-90
Journal of Cleaner Production

The link between eco-innovation and business performance: a Taiwanese industry context

https://doi.org/10.1016/j.jclepro.2013.09.050Get rights and content

Highlights

  • This study takes a holistic approach to investigating inter-relationships of different types of eco-innovation.

  • We find that eco-organizational innovation has the strongest effect on business performance.

  • Eco-product and eco-process mediate eco-organizational innovation and business performance.

Abstract

In practice, there are various types of eco-innovation. While each type of innovation has its own attributes, determinants, and contribution to business performance, it is not effective to implement eco-innovation programs without a holistic view. This study draws from the resource-based view theory to investigate inter-relationships among three types of eco-innovation (process, product, organizational) and their relative impact on business performance. Using structural equation modeling with 121 samples collected from Taiwan Environmental Management Association, we find that eco-organizational innovation has the strongest effect on business performance. Additionally, eco-process and eco-product innovations partially mediate the effects of eco-organizational innovation, and eco-product innovation mediates eco-process innovations' effects on business performance. Business performance is directly and indirectly affected by eco-organizational, eco-process, and eco-product innovations. The findings suggest that, in order to develop effective eco-innovation programs, managers must understand the interdependence and co-evolutionary relationships between different types of eco-innovation. Overall, this study extends the discussion of innovation to the area of environmental innovation or eco-innovation.

Introduction

Many organizations have advocated innovation programs pertaining to environmental management to effectively reduce waste and improve the utilization of scarce resources (Carrillo-Hermosilla et al., 2010). Kemp and Pearson (2008, p. 7) referred to those innovative programs in relation to environmental management as eco-innovation, which is defined as “The production, assimilation or exploitation of a product, production process, service or management or business methods that is novel to the organization (developing or adopting it) and which results, throughout its life cycle, in a reduction of environmental risk, pollution and other negative impacts of resources used (including energy use) compared to relevant alternatives.” With the ever increasing pressure from the government and marketplace regarding manufacturing sustainability, developing an effective eco-innovation program and making it an integrative part of a firm's management programs is important (Carrillo-Hermosilla et al., 2010, Dangelico and Pujari, 2010).

In practice, there are various types of eco-innovation (OECD and Eurostat, 2005, p. 16), including product innovations, process innovations, organizational innovations and marketing innovations. While each type of innovation has its own attributes, determinants, and contribution to environmental performance (Christensen, 2011, Damanpour et al., 2009), researchers have cautioned that it is not effective to implement innovation programs separately without a systemic view (Damanpour et al., 2009, Chou et al., 2012, Xing et al., 2013). Nonetheless, previous studies have mostly focused on the development and performance of individual eco-innovation programs (e.g., Pujari, 2006, Anttonen et al., 2013), such as product service innovation (Maxwell et al., 2006), service innovation (Chou et al., 2012, Xing et al., 2013), technological innovation (Moore and Ausley, 2004, Tseng et al., 2013), and infrastructure and policy innovation (Rehfeld et al., 2007, Shin et al., 2008).

Developing eco-innovation without a holistic view could be counter-productive. For instance, several researchers addressed eco-innovation issues from a purely technological perspective (e.g., Dangelico and Pujari, 2010, Weinberger et al., 2012). Socio-technical system theory argues that implementing innovations should be coupled with proper social and managerial systems in order to optimize business performance (Cummings and Srivastva, 1977). In addition, an organization must be able to adjust and fine-tune its structure and internal activities to support technological aspects of eco-innovation (Lam, 2005). Brunnermeier and Cohen (2003) and Horbach (2008) also pointed out that an effective eco-innovation program should not be the sole responsibility of the R&D unit. Instead, an organization must take a holistic approach to developing and supporting its eco-innovation programs. Accordingly, knowing how different types of eco-innovation complement each other is critical for firms to effectively implement their entire innovation programs.

Responding to the call from the literature, this study intends to offer a holistic view of eco-innovation programs by investigating the inter-relationships among different types of eco-innovation and their impact on business performance. Specifically, this study examines the relative effects and inter-relationship effects of three types of eco-innovation (eco-process, eco-product, eco-organizational). The following section reviews relevant literature on different types of eco-innovation to develop research hypotheses, followed by a discussion of research methodology, including samples and measurements. The statistical results and discussion are presented and, finally, managerial implications and suggestions for future research are provided.

Section snippets

Eco-innovation types

The literature defines the boundary of eco-innovation into external and internal eco-innovation. The external boundary of eco-innovation includes all external activities of the organization for green and sustainable activities, including suppliers (Lee and Kim, 2011), regulators (del Río et al., 2010), and market demand (Lin et al., 2013). The internal boundary of eco-innovation activities is related to practices for effectively and efficiently managing eco-innovation processes within

Theoretical development

Resource-Based View (RBV) provides a good theoretical basis to discuss the contribution of resources and capabilities to performance in each of the aforementioned three types of eco-innovation. Specifically, these theories shed light on the relations among internal resources, capabilities and performance, which constitutes the basis for discussing eco-innovation in a holistic view.

The principal idea of the RBV and Natural RBV is that the competitive advantage of a firm lies in its heterogeneous

Research methods

The survey method is used in this study to provide an overview of the existing eco-innovation practices and effectiveness in Taiwan. This section presents the development and validation of eco-innovation measurement. A discussion of data collection and sample used for statistical analysis is also presented.

Statistical results

This section examines the psychometric properties of measurement, including reliability, and convergent and discriminant validity. Structural equation modeling (SEM) analysis was applied to test research hypotheses with firm size and firm age as control variables. For firm size, we used the logarithm of the number of employees. Firm age is defined as the number of years the firm has been in operation. The results of SEM analysis regarding the direct, indirect, and total effects of three types

Discussion

Examining all three types of eco-innovation and reviewing their inter-relationship offers a holistic view of eco-innovation programs that previous studies fail to do. The analysis of direct and indirect effects of individual eco-innovation types also provides valuable guidelines for developing well-aligned eco-innovation programs.

First, the results on Table 3 delineate the inter-relationship between eco-organizational, eco-process, and eco-product innovation. While eco-process innovation

Conclusions

Drawing from the extant innovation literature and the field studies, we constructed a research model that demonstrates the relative importance of each type of eco-innovation, and the nature of the interdependency between them. While previous studies suggested possible relationship between organizational innovation and product/process innovation, there is never a definite conclusion as to how eco-organizational innovation can contribute to the formation of eco-product or eco-process innovations.

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