Antecedents and performance implications of stakeholder understanding in green product innovation

When developing green product innovations, firms are often confronted with a complex system of interdependent stakeholders and their interests. This study focuses on the holistic understanding of stakeholder interests and introduces the organizational capability of stakeholder understanding, defined as the degree to which a firm understands its stakeholder system. In particular, this study empirically examined the antecedents and consequences of stakeholder understanding in a green product innovation context. Through a two-stage survey approach, data were collected from 181 innovation professionals working in United States based manufacturing firms. Using hierarchical regression analysis, hypotheses about antecedents and consequences of stakeholder understanding are tested. Results show that stakeholder understanding is higher in firms with high innovation orientation, and lower in environments with high complexity. Results also show that stakeholder understanding has positive effects on three types of firm performance: green performance, market performance, and firm innovativeness. In addition, results of piecewise linear regression reveal that only for firms that exceed the median level of green orientation there is a positive relationship between green orientation and stakeholder understanding. The study's implications are that stakeholder understanding is a relevant capability for firms that aim to develop better and greener product innovations. To obtain stakeholder understanding, firms should strive for innovation and excel in green orientation, because only for truly green firms, green orientation helps to develop stakeholder understanding.