Environmental innovation in chains and networks : assessing determinants and performance implications in Dutch food and beverage firms

Challenged by the increasing scale of environmental degradation and corresponding stakeholders’ pressure, firms are increasingly integrating environmental concerns into their operations and into the relationships with external partners. Mainly through the theoretical lens of the Resource-based view and its spins-offs, this dissertation focuses on environmental innovation and environmental management (EM) that involves supply chain partners as means of promoting sustainable industry growth, using the Dutch food and beverage processors as a subject of the study. In–house environmental innovation and supply chain-oriented EM have a promising potential to induce sustainable growth in the industry because they are increasingly connected not only to improved environmental but also to an improved economic performance. However, the implications of environmental innovation and supply chain-oriented EM for the firm performance are not clear-cut and require further investigation. Prompted by the promising potential of environmental innovation and supply chain-oriented EM, the current research agenda focuses on their determinants: internal organizational capabilities and external factors (such as the roles of public policies, consumer demand, and other stakeholder pressures). Therefore, the present dissertation aims to investigate determinants of environmental innovation and of supply chain-oriented EM and their impact on firm performance.

Chapter 2 illustrates in a dynamic perspective how changing institutional pressures and internal organizational factors influence the development of chain-oriented EM. Overall, institutional pressures are proven to be an important determinant. However, pressures on different levels vary considerably with respect to their impact. We found that pressures from supply chain partners and increasingly from long-term public–private environmental covenants significantly influence the implementation of supply chain-oriented EM. Interestingly, regulative institutional pressure from public authorities appeared to have no impact on supply chain-oriented EM. These findings are of particular interest as they suggest that Dutch public policy has chosen to rely on a responsibility culture, initiative, and self-organization, rather than on direct steering. This policy setting seems to work since our data evidence a progress in the implementation of supply chain-oriented EM. Furthermore, the findings show that food processors with more developed EM systems, associated with the presence of continuous improvement capabilities, are more likely to advance their EM by implementing supply chain-oriented EM. In course of time, as firms increasingly consider the implementation of supply chain-oriented EM as appropriate behaviour, institutional pressures become less influential and internal organizational factors become crucial to enable the implementation of supply chain-oriented EM.

Chapter 3 offers further insights into organizational capabilities for supply chain-oriented EM. Prior research rarely considered how firms use their existing capabilities and the capabilities developed within their environmental strategy to come up with new and better ways to reduce the environmental impact. We investigate whether the integration of environmental concerns within the firm can provide an additional impetus to the implementation of supply chain-oriented EM, when combined with innovative orientation. In this context, we assess performance implications of capabilities for supply chain-oriented EM. Compared with the past research, we consider supply chain-oriented EM as an organizational capability for the integration of supply chain partners into EM, not as a set of environmental practices. The findings show that the development of supply chain-oriented EM is supported by both capabilities of innovative orientation and environmental integration and is accelerated by their combination. Furthermore, integration capabilities on in-house and supply chain levels appeared to be interconnected. The capability to integrate environmental concerns within the firm induces the integration of environmental concerns in the supply chain relationships. Finally, it is shown that the overarching capability to engage supply chain in EM pays off. This capability is induced by the implementation of interconnected environmental practices that involve supply chain partners (green purchasing, environmental collaboration with customers, and eco-design).

Chapter 4 advances the understanding of the impact of supply chain-oriented EM on firm performance by introducing in environmental research the problem of appropriation of benefits created by the partners. Grounded in the Resource based view spin-offs, we claim that supply chain-oriented EM can enhance the performance of the focal firm not only directly, but also indirectly. The indirect relationship implies that supply chain-oriented EM stimulates the focal firm to implement more environmentally sustainable processes that in turn contribute to firm's performance. We found that supply chain-oriented EM involving customers can induce in-house environmental innovation that results in strong performance improvements. Interestingly, supply chain-oriented EM involving suppliers brings about weak performance improvements as a result of appropriation of the advantage realized by suppliers. Therefore, supply chain-oriented EM involving suppliers has a limited value and potential for Dutch food processors. Possibly, supply chain-oriented EM involving suppliers can induce process changes among suppliers, not focal firms. In this context, Chapter 4 illustrates the necessity to integrate the characteristics of supply chain actors into the research on the implications of supply chain-oriented EM. The findings regarding the impact of supply chain-oriented EM on the sustainability of internal operations have a link with firm performance. Supply chain-oriented EM that involves suppliers was shown to induce no significant improvements in environmental sustainability of operations among food processors. Unlike supply chain-oriented EM involving suppliers, supply chain-oriented EM involving customers has an indirect effect on the firm performance via environmental innovation.

Firm’s network can be seen as a rich source of knowledge. Having access to knowledge and resources of the partners in supply chains and networks does not imply that a firm can appropriate (i.e. capture) corresponding benefits that could enhance environmental sustainability of in-house operations and performance. The exploitation of external knowledge requires the development of organizational capability to realize the value of new external knowledge, assimilate it and ultimately exploit it – absorptive capacity. Chapter 5 brings absorptive capacity into the discussion regarding the role of external partners in environmental innovation. Environmental innovation can also rely on internal knowledge sources. Development and accumulation of internal knowledge can be supported by the continuous improvement capability vested in the EM system. Therefore, Chapter 5 informs the discussion of the roles of internal and external knowledge for environmental innovation by considering organizational capabilities for knowledge sourcing: absorptive capacity to exploit external knowledge and continuous improvement to develop and accumulate internal environmental knowledge. The findings demonstrate that Dutch food processors develop environmental innovations relying on both external knowledge in their network tapped with the help of absorptive capacity and on internal knowledge built within the EM system with the help of continuous improvement capabilities. These findings challenge the presence of a substitution effect between internal and external knowledge. We expand the research on the determinants of environmental innovation by considering not only different knowledge sources but by providing insights into the knowledge sourcing process.

Overall, the dissertation evidences an increasing importance of internal organizational capabilities to enable sustainable industry growth. Internal organizational capabilities appeared to be decisive to induce environmental innovation and supply chain-oriented EM. Also the appropriation of benefits created in cooperation with external partners and exploitation of external knowledge require certain organizational capabilities. In the earlier periods of corporate environmentalism, external pressures were of primary importance to induce the reduction of the environmental impact. Nowadays, the increasing role of organizational capabilities implies that a lot of power is concentrated in the hands of managers. For public policy, these findings suggest a focus on the development of instruments to stimulate the accumulation of organizational capabilities and capacity building.