Green innovation
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Resource limitations and environmental concerns have made sustainable operations of assets and environmental pollution one of the major global issues. The economy’s overall development may not go “hand in hand” with the reduction of pollution and sustainable management of resources (Wang and Song, 2014). Building a sense of balance among high resource consumption and development of economy relics is a constant challenge that forces organizations to run-through eco-friendly professional deeds having high economic worth (Chan et al., 2012). Many organizations are forced to adopt activities that generate and increase economic value (Porter and Kramer, 2019).
The excessive use of non-renewable resources prompted by speedy economic development has hurt the atmosphere and elevated various environmental worries (Atlin and Gibson, 2017). To preserve energy and lessen emissions of carbon, numerous countries have established agencies and regulations for environmental sustainability and its protections; examples comprise limitations on “chlorofluorocarbons, the sustainable development announcements of the Johannesburg world summit,” and limits on the usage of few hazardous materials “electrical and electronic equipment requirements, the European Union’s Restriction of Hazardous Substances Directive” (Weng et al., 2015, p. 4998). Such impositions of rule and regulations have drawn the attention of environmental supervisors (Zhu and Sarkis, 2004; Claver et al., 2007); they also have the same outcome in varying the management and competition practices between the organizations (Feng and Chen, 2018). To adhere to the new eco-friendly regulations, to have a positive branding image (Chen, 2008a; Hillestad et al., 2010), to improve their firms’ performance and to have a competitive advantage (Claver et al., 2007; Rusinko, 2007), organizations have had to accept eco-friendly practices (Afridi et al., 2020).
Numerous investigations examined factors altering green innovations (GI) practices, such as environmental regulations, ethics, legal systems, and supply chain (Feng and Chen, 2018; Gao et al., 2018; El-Kassar and Singh, 2019; Seman et al., 2019). Studies have also examined an increase in awareness, the general public, and stakeholder pressure linked to green environmental issues (Foo, 2018). Moreover, literature provides evidence of optimized pressure from society, customers, and government bodies to practice GI. However, the literature lacks findings on the relationship of stakeholders’ pressure [competitor’s pressure, government pressure, and employee conduct (EC)] about GI practices. The manufacturing sector faces higher stakeholder pressure due to possibly the highest waste-producing sector (Chen, 2008b; Chang, 2011). The single industry was studied for GI practices (Cordano et al., 2010; Lin and Ho, 2011). This study fills the gap in investigating these constructs in the manufacturing and service industries to enrich existing GI practices and stakeholder pressure literature. Moreover, stakeholder pressure (customer) was examined for GI in third party logistic firms (Chu et al., 2019), as well as in express companies (Zhang et al., 2020), and in manufacturing firms (Song et al., 2020). Those three studies were conducted in China’s context, which highlights the issue of conducting and focusing on the stakeholder pressure in the manufacturing and service industries of Pakistan being a developing economy in the initial stages of GI practices adoption (Shahzad M. et al., 2020).
“Go-green” is an initiative mainly employed by firms to deal with eco-friendly problems. Approaches to attain green abilities and emerging eco-friendly practices have focused on attention and discussion in the management sciences’ discipline over the years (Ullah, 2017). To ease the acceptance of GI, firms must consider the significant factors and precursors in their business entities (Arfi et al., 2018). These comprise apprehensions of consumers (Zhu et al., 2017), preferences of professionals and owners (Huang et al., 2009), competency of suppliers and partners (Chiou et al., 2011), government regulating authorities and their regulations (Kammerer, 2009), and the environmental, technological, and organizational factors of GI practices (Lin and Ho, 2011). Green technologies consist of GI practices (e.g., green product, process, managerial, and marketing innovation) and the execution of green human resource management practices (e.g., green training and development, administrative support and culture, recruitment and selection, compensation, and benefits). GI is a significant strategic enabler to acquire justifiable development, as it practices energy-saving, environment-protecting, waste-recycling, and pollution-preventing methods (Albort-Morant et al., 2018). Furthermore, GI can be divided into green product, green marketing, green processes, and green management that are intended for eco-friendly environment, decreasing consumption of energy and increasing efficient use of the resource, control over pollution emission, and waste recycling, improving the performance of the organization and providing the pollution-free environment to society at large scale (Seman et al., 2019).
Previous studies have witnessed some proofs of the impacts of numerous drivers such as corporate environmental ethics (El-Kassar and Singh, 2019), environmental regulations (Feng and Chen, 2018), the legal system (Gao et al., 2018), and green supply chain management practices (Seman et al., 2019) on GI practices. To date, some systematic and comprehensive investigations of the precursors and factors of GI have been performed. Foo (2018) proposed that the increase in awareness and pressure from the stakeholders and the general public have necessitated organizations to be more transparent in facing and handling green environmental issues of their supply base execution. Hence, it is critical to focus on stakeholders’ views in an organization on establishing and sustaining GI abilities and practices. Then executives of organizations are involved in examining the essential factors necessary for creating GI practices. Are there pressures from established institutions’ regulations and competitor’s critical factors of GI? How should firms have dealt with the concerns of both internal and external stakeholders?
Furthermore, previous studies have concentrated on the manufacturing sector as it is one of the most critical waste producers that upset the balance of an environment. With rising trepidations on global pollution, this industry is facing increasing pressures from customers, society, and governing agencies to save energy, resources, protect the eco-friendly environment and maintain its sustainability (Chen, 2008b; Chang, 2011) or on a single industry (e.g., Cordano et al., 2010; Lin and Ho, 2011). It would be beneficial to offer an all-purpose model to investigate issues about GI for both the service and manufacturing firms. Therefore, in this study, we borrowed help from the “stakeholder theory” (Freeman, 2010) to aid in our investigation methodology. This theory has been utilized to get a comprehensive view of a particular organization to examine stakeholders’ influence (participants) on GI practices. To answer the stakeholders’ pressure, organizations should focus on an overall strategic plan that involves and satisfies both internal and external stakeholder groups (Bryson, 2018).
Review of Literature
Stakeholder View (SV)
The word “stakeholders” was initially used by the “Stanford Research Institute” in 1963 and was defined as “those groups without whose support the organization would cease to exist” (Friedman and Miles, 2006). While this concept was first brought into a “strategic discipline” in 1984 by Freeman (1984), stakeholders were not only separate from shareholders but also involved in the decision-making process (Donaldson and Preston, 1995; Mitchell et al., 1997). In an academic view, the “stakeholder theory” holds a unique perspective for the organizations and offers a diverse description of a firm’s structure and everyday actions (Sulkowski et al., 2018). The stakeholder theory, founded on four indispensable grounds (Jones and Wicks, 1999), first suggests that organizations have associations with several procedures, all of which are upset or pretentious by their results (Laplume et al., 2008; Co and Barro, 2009). Second, such links are recognized in the firms’ procedures and results and their stakeholders’ firms’ views.
Third, stakeholders’ inherent value, and comforts cannot be permitted to override the safeties of others (Clarkson, 1995; Co and Barro, 2009). Fourth, the decision making of the organizations is the central point (Alrowwad et al., 2017). Stakeholder theory has been accepted for numerous ecological scholarships in that it has been active in persuading both company environmental sensitivity (Crane and Livesey, 2017) and environmental policies (Salem et al., 2018). Although the outcomes have been mixed, and the stakeholders’ views on ecological management have been unpredictable. For example, Jaaffar and Amran (2017) found that the organizations’ board of directors is involved in deciding eco-friendly strategies and policies while small business entities and proprietors decide GI (Huang et al., 2009). In addition, in manufacturing organizations in Germany, stakeholders have affected the firms’ selections concerning ecological response forms (Murillo-Luna et al., 2008), and they were confidently related with unproved GI (Wagner, 2007); in contrast, the association among eco-friendly policies and stakeholders’ administration was not perfect in Belgian organizations (Buysse and Verbeke, 2003). The review paper by Seman et al. (2018) concludes that the stakeholders’ views have a more considerable influence on GI practices.
Green Innovation (GI)
Works of GI are commonly divided into two types. The first describes GI as a firm’s abilities (Gluch et al., 2009), whereas the second defines GI as an organization’s environmental practices (Lin and Ho, 2008; Ho et al., 2009). When it comes to organizational practices, GI is described as “the hardware or software innovation related to green products or processes” (Song and Yu, 2018); it is proposed that GI comprises management practices and technological advancements that expand the environmental and organizational performance (OP) and provide a competitive edge to the firms (Rennings, 2000). Other researchers recommend that GI consists of unique or altered systems, processes, products, and practices that provide an advantage to the environment and subsidize firms’ sustainability (Xie et al., 2019).
A recent study expresses GI as “the new or modified products and processes, including technology, managerial, and organizational innovations, which helps to sustain the surrounding environment” (Ilvitskaya and Prihodko, 2018). Moreover, GI may refer to “a creative initiative that reduces negative environmental impacts or that yields environmental benefits as it creates value in the market” (Chen et al., 2006). GI is divided into two kinds, such as “green product innovations” (providing new green products to consumers) and “green process inventions” or “greening” business procedures (Tang et al., 2018). Furthermore, due to the growing customer-centered apprehensions concerning environmental protection, ecological management has become a critical part of many firms’ strategic policies and tactical plans (Chiou et al., 2011; Khan et al., 2019).
Regulations related to an environment may lead toward a “win-win situation” (Chan et al., 2018) since they can perform dual tasks, increase profits and lessen pollution; It is proposed that GI should be categorized distinctively from other innovative maneuvers since it harvests not only a spillover consequence for exploration and expansion efforts but also optimistic external possessions such as enlargements in the atmosphere (Kammerer, 2009). A study by Feng et al. (2018) on the Chinese industry’s manufacturing firms has shown that internal and external environmental orientation is significantly associated with GI practices. The utilization of GI practices inside and outside the firms’ restrictions are vital for impacting both economic and ecological performance goals (Khan and Qianli, 2017; Saeed et al., 2018). Moreover, Lee et al. (2018) found that stakeholders’ pressure, organizational support, and societal expectations were significant factors for the motivation to adopt GI practices and corporate environmental responsibility (Shahzad F. et al., 2020). Moreover, the study of Fernando et al. (2019) showed that GI, regulation, supplier intervention, and technology have a strong influence on sustainable performance mediated by service innovation capabilities. The study by Famiyeh et al. (2018) also supported eco-friendly practices, showing that environmental management practices have direct and indirect positive effects on environmental performance. Xie et al. (2019) used green product innovation as a moderator for the green process innovation and OP, but the study did not find the supported results.
Proposed Framework and Hypothesis Development
Proposed Framework
This study involves the three dimensions of stakeholders’ view (e.g., competitor pressure, government pressure, and employees conduct) as independent variables. Organizational and environmental performance are used as dependent variables. Moreover, GI practices (e.g., green product and green process) are used as mediators, and the moderating role is performed by innovation orientation (IO). A total of six hypotheses have been suggested and showed in Figure 1.
Figure 1
FIGURE 1. Conceptual model of the study.
Hypothesis Development
We followed “Freeman’s stakeholder framework” (Freeman, 2010). We used three stakeholders’ dimensions to view the government’s and competitors’ pressure as external and employees’ conduct as internal stakeholders. However, there are various other dimensions, such as customer, community, and supplier pressure. This study also treats both aspects of stakeholder’s views as factors that are employing pressure on the organizations and motivating the firms to improve environmental practices. Identifying eco-friendly business practices are becoming critical elements as organizations are confronted with “both internal and external forces/pressures from environmental agencies, governmental regulations, stakeholders, competitors, customers and employees” (Wang and Song, 2014). Singh and El-Kassar (2018) conclude that the stakeholders’ view (e.g., pressure by the government, competitors, employees, customers, society, and suppliers, respectively) positively influences the GI practices.
Competitors Pressure (CP)
Organizations generally act in response to the movements of rivals and the operating industry. When competitors accept or implement new eco-friendly practices, organizations in the same sector will feel overstretched to reconfigure the structures and policies (Durand and Georgallis, 2018). In short, organizations need to be attentive to their competitor’s products/services, actions, and norms and regulations of the industry they are part of so that their innovation abilities are similar to others in the industry. For instance, organizations must be conscious of new energy-saving, waste-recycling, pollution-preventing methods, and changes in processes used for the implementation and paraphernalia that are accessible in the market. They are required to have an eye on the methods their competitors have adopted to lessen energy costs while restructuring process and reconfiguring their manufacturing facilities to overtake/perform equivalent to/better than their rivals. Thus, to endure competitive spots, organizations may emulate competitors’ environmental practices and actions, especially the front-runners in their industries (Abrahamson and Rosenkopf, 1993). Singh and El-Kassar (2018) found a positive relationship between stakeholders’ views and GI practices. Furthermore, a study on 442 Chinese firms also confirmed that competitors’ pressure provides organizations with more significant incentives to adopt GI practices (Cai and Li, 2018). In another study (Yu, 2019), the results revealed that formal and informal environmental regulation and pressures have strong influences on food-making companies’ GI activities. Thus, hypothesis 1 is established:
H1: Competitor’s pressure has a significant impact on GI practices.
Governmental Pressures (GP)
Various scholarships have explored the association among regulatory rules and environmental practices and have proposed that governmental pressures (GP) is a crucial factor of external stakeholders (He et al., 2018). Variations in regulations and implementation of these changes by the government disturb organizational activities concerning environmental management (Yakubu, 2017). In particular, to compete internationally, organizations must keep an eye on both international and national laws to overcome any obstacle. The consistency of the rules and organizations’ insights into the severity of the regulations will define the degree to which firms essentially execute environmental prevention practices (Bernauer et al., 2007). The appropriate governance mechanisms and structural design can successfully manage and supervise the association between nature and mankind (Famiyeh et al., 2018). Moreover, Tirabeni et al. (2019) showed that organizations are reevaluating their manufacturing processes in response to “societal and governmental” pressures concerned with eco-friendly well-being. Furthermore, the degree to which the government enforces/supports the regulations has a substantial influence on the firms’ environmental strategies (Lindell and Karagozoglu, 2001; Zeng et al., 2011), creating a significant task to examine. A study by Zhang et al. (2019) on 224 firms of the manufacturing industry found that institutional pressure significantly affects green supply chain management practices and business performance. In a study by Huang et al. (2016), results show that customer and regulatory pressure encourage green response and increase performance. A survey by Fernando and Wah (2017), based on Malaysian firms, concluded that compliance with government regulations impacts environmental performance. Hence, we suggest hypothesis 2: