Sustainable Innovation and the Triple Bottom Line

Journal of Marketing Theory and Practice ISSN: (Print) (Online) Journal homepage: https://www.tandfonline.com/loi/mmtp20 Sustainable innovation and the triple bottomline: a market-based capabilities and stakeholder perspective Kelly Weidner , Cheryl Nakata & Zhen Zhu To cite this article: Kelly Weidner , Cheryl Nakata & Zhen Zhu (2020): Sustainable innovation and the triple bottom-line: a market-based capabilities and stakeholder perspective, Journal of Marketing Theory and Practice, DOI: 10.1080/10696679.2020.1798253 To link to this article: https://doi.org/10.1080/10696679.2020.1798253 Published online: 26 Aug 2020. Submit your article to this journal Article views: 6 View related articles View Crossmark data Full Terms & Conditions of access and use can be found at https://www.tandfonline.com/action/journalInformation?journalCode=mmtp20 JOURNAL OF MARKETING THEORY AND PRACTICE https://doi.org/10.1080/10696679.2020.1798253 Sustainable innovation and the triple bottom-line: a market-based capabilities and stakeholder perspective Kelly Weidnera*, Cheryl Nakata b *, and Zhen Zhuc* a Marketing, School of Economics and Business Administration, Saint Mary’s College of California, Moraga, North California, USA; bJoseph M. Bryan School of Economics and Business Administration, University of North Carolina at Greensboro, Greensboro, North Carolina, USA; c Center for Innovation and Change Leadership, Sawyer Business School, Suffolk University, Boston, Massachusetts, USA ABSTRACT Firms are creating sustainable innovations in response to customers and other stakeholders. Yet little is known about the capabilities required, as well as whether these innovations produce the touted people, planet, and profit – or triple bottom-line – rewards. Through the lens of marketbased capabilities and stakeholder theories and based on a survey of firms working on sustainable innovations, this study determines the capabilities of market-based sustainability and organizational learning propel sustainable innovation, contingent on public ownership and organizational unlearning. We also find sustainable innovation contributes to the triple bottom-line by enhancing firms’ environmental performance and social performance, and in turn economic performance. As firms encounter growing concerns about resource depletion, environmental degradation, and social inequalities, creating sustainable innovations offers a promising path forward. Sustainable innovations are new or improved products, services, or processes aimed at social equity and environmental integrity without sacrificing economic prosperity (Brundtland Commission, 1987; Elkington, 2004; Varadarajan, 2015). Over 50% of companies pursue sustainability and 20% consider it extremely important to incorporate in innovations (Markham & Lee, 2013). Kimberly Clark for example, developed a towel for use in public washrooms that enables handdrying with a single sheet. The towel reduces waste not only when used but also when made: 1.1 million cubic meters less water is required annually to manufacture it compared to the prior method (Kiron et al., 2013). Relative to traditional innovations sold to markets, sustainable forms attempt to satisfy a broad array of stakeholders, most importantly customers but also activists, shareholders, and other constituents (Parmar et al., 2010). Because stakeholder interests often collide, balancing them requires a complex set of firm capabilities to do well (Adams et al., 2016; Crittenden et al., 2011). Another feature of sustainable innovations is their purported social, economic, and environmental benefits, together known as the triple bottom-line (Crosno & Cui, 2014; Elkington, 2004). Firms want these innovations to achieve all three bottom-line goals, but are confronted with seeming tradeoffs among them (Kiron et al., 2013). Research on sustainable innovation is relatively new and steadily emerging. A key gap in this literature is how businesses effectively pursue sustainable innovations that satisfy buyers in the face of competing demands from other stakeholders (Hastuti et al., 2015; Ketata et al., 2014). In particular, what stakeholder-sensitive capabilities are required to create and introduce sustainable innovations for markets, accounting for both external and internal firm conditions? Past empirical studies have examined the main effects of several isolated capabilities, such as sensing and collaboration (Aboelmaged & Hashem, 2019; Mousavi et al., 2018). Yet largely overlooked are market-related capabilities in tandem with contextual factors that impact sustainable innovation (Dangelico & Pujari, 2010; Dossa & Kaeufer, 2014). Meta analyses indicate that capabilities applied toward developing innovations are contingent on firms’ endogenous and exogenous conditions (Evanschitzky et al., 2012; Henard & Szymanski, 2001). Hence there is a need to examine market-based capabilities together with contextual factors, providing a more comprehensive understanding of the determinants of sustainable innovation. A second major knowledge gap is on the triple bottomline. Does inventing and launching sustainable innovations for markets generate the hoped-for triple bottom-line, and CONTACT Kelly Weidner klw7@stmarys-ca.edu School of Economics and Business Administration, Saint Mary’s College of California, 1928 Saint Mary’s Road, Moraga, CA 94575. *These authors have contributed equally to this work. © 2020 Taylor & Francis Group, LLC 2 K. WEIDNER ET AL. if so how? Sustainable innovation has long been touted to yield simultaneous people, planet, and profit rewards, constituting its chief attraction (Crosno & Cui, 2014; Eskildsen & Edgeman, 2012; Varadarajan, 2015). Past research has examined consequences such as sustainable consumption and new opportunity creation (Dangelico et al., 2013; Kamboj & Rahman, 2017), but not the triple bottom-line. Furthermore, relationships among social, environmental, and economic outcomes have not been established. Because the three triple bottom-line components appear to be in tension with one another (Ozanne et al., 2016; Van der Byl & Slawinski, 2015), would businesses need to sacrifice one or more for the others or can all three types of gains be achieved? In short, whether sustainable innovation leads to the triple bottom-line, and ways the components are linked to one another remain open questions. This study aims to address the above gaps by determining 1) the market-related capabilities that, jointly with internal and external contingencies, foster sustainable innovations directed toward buyers; and 2) the triple bottom-line firm rewards, if any, from sustainable innovation, as well as the dynamics among the bottom-line’s components. We draw on market-based capabilities and stakeholder theories to develop a research model, and then test the model through a survey of firms. Specifically, we study if the capabilities of market-based sustainability and organizational learning depend on public ownership and organizational unlearning, respectively, to determine sustainable innovation, and how sustainable innovation affects triple bottom-line performance and inter-relationships among social, economic, and environmental benefits. We contribute a new and more comprehensive model of sustainable innovation and the triple bottom-line based on these theoretical perspectives and empirical testing, illuminating antecedents, consequences, and contingencies. Hereafter we present the literature and theoretical foundations, hypotheses, methods, findings, and implications of our study in that order. Literature review Sustainable innovation The sustainable innovation literature as a body of scholarship is at the early stage. Its origins are in sustainability, a set of policies developed by a United Nations commission aimed at lifting the conscience and directing the actions of countries toward meeting current global needs without sacrificing the ability of future generations to meet their own (Brundtland Commission, 1987). These policies and others like them, along with increasing scientific evidence of human-ecosystem interdependencies, and intensifying demands from consumers, investors, and activists for more ethical business behaviors, have ushered in the era of corporate sustainability (World Commission on Environment and Development [WCED], 1987). Many companies today claim to embrace corporate sustainability, which are integrated structures and practices that address economic, environmental, and social concerns and that implicitly question the primacy of shareholder profitability (Ahern, 2015; Simoes & Sebastiani, 2017). Sustainable innovation is one expression of corporate sustainability in that a firm’s inventions are responses to ethical concerns of customers and the public at large. Whether the motivation for pursuit of sustainable innovation is enlightened self-interest or deeply held virtue is subject to debate. The empirical sustainable innovation literature has largely focused on ecological forms, as shown in Table 1. Examples include studies on environmental innovations and the impacts of regulatory and normative pressures (Berrone et al., 2013), on green product innovation and the ways ethical codes, regulatory compliance, and packaging R&D shape a firm’s actions (Dangelico & Pujari, 2010), and consumer attitudes and purchase decisions using a paperless technology for live events tickets (Crosno & Cui, 2014). Fewer works have examined sustainability in its fuller sense, encompassing not only ecological but also social and economic perspectives; therefore, less is known about how firms manage the inherent contradictions, for example, of designing a new product that is environmentally sound yet compromises social justice by being priced out of reach to most buyers. Scholars have investigated specific types of sustainable innovations, such as sustainable financial innovation (Dossa & Kaeufer, 2014) and open innovation for sustainability (Perl-Vorbach et al., 2015), as well as selected aspects of sustainable innovations, such as maturity (Bacinello & Tontini, 2018) and transport (Van den Bergh et al., 2007) (see Table 1). While shedding light, the works provide fragmented insights due to narrow and specialized foci. Knowledge would be advanced by applying a broader notion that reflects more forms and types of sustainable innovations. We therefore propose studying sustainable innovation in this fuller sense, defining it as the generation, design, and implementation of a new or improved product, service, or process that incorporates a concern for social equity and environmental integrity without sacrificing economic prosperity (Brundtland Commission, 1987; Elkington, 2004; Varadarajan, 2015). Antecedents and contingencies for sustainable innovation A range of antecedents to sustainable innovation has been previously empiricized (see Table 1). These works JOURNAL OF MARKETING THEORY AND PRACTICE 3 Table 1. Empirical sustainable innovation studies. Author(s) Key Construct(s) Aboelmaged and Hashem Green innovation adoption (2019) Sustainable innovation orientation Ayuso et al. (2011) Bacinello and Tontini (2018) Berrone et al. (2013) Environmental innovation Bossink (2007) Sustainable innovation Dangelico and Pujari (2010) Green product innovation Dangelico et al. (2013) Green product development Antecedents (A) & Moderators (M) A: Sustainable collaboration, sustainable orientation, sustainable human capital A: Internal stakeholder engagement, external stakeholder engagement, knowledge management Maturity in sustainable innovation Consequences Market and financial performance of firm A: Regulatory pressures, environmental normative pressures M: deficiency gap between the firm’s environment performance and industry standards, organizational slack, asset specificity A: Leadership style (charismatic, instrumental, strategic, and interactive) A: Regulatory compliance, competitiveness, ecological responsibility, company’s ethical code, R&D in packaging, life cycle perspective A: Networks of collaborations, external knowledge links, acquisition of know how Creation of new opportunities, financial performance Dossa and Kaeufer (2014) Sustainable financial innovation Kamboj and Rahman Technical innovation and Non(2017) technical innovation A: External crisis, positive ethical opportunity A: Product development, communication, channel linking, pricing Ketata et al. (2014) Sustainability in firm’s innovation activities Manohar and Pandit (2014) Maletic et al. (2014) Innovation culture A: Investments in technological absorptive capacity, in education of employees, in individual employee’s absorptive capacity; diversity and depth of external knowledge; regulatory demands; government financial support A: Core values and beliefs Success Sustainable consumption, competitive advantage, firm performance Sustainability-oriented innovation Organizational practices performance Mousavi et al. (2018) Innovation toward a greater degree A: Sensing, reconfiguring, seizing of sustainability A: Open innovation, intensity of collaboration Perl-Vorbach et al. (2015) Sustainable open innovation Environmentally A: Political process factors e.g., culture at Ministry of Transport, Van den Bergh et al. sustainable transport socio-cultural and psychological factors e.g., media (2007) attention Wiedmann et al. (2011) Innovation resistance to natural gas A: Consumers’ financial performance; physical, time, social, and Consumers’ innovation vehicles psychological risks resistance to natural gas vehicles This is a representation, rather than complete compilation, of the empirical sustainable innovation literature. are directed toward learning what propels or enables firms to undertake this difficult enterprise. Among motivating forces are regulatory pressures, competition, core values, and media attention (Dangelico & Pujari, 2010; Manohar & Pandit, 2014). In addition, scholars have examined assets helpful to the endeavor, including sustainable human capital and technological absorptive capacity investments (Aboelmaged & Hashem, 2019; Kamboj & Rahman, 2017). Receiving far less attention are market-related capabilities. The few organizational capabilities studied thus far include sustainable collaboration (Aboelmaged & Hashem, 2019), knowledge management (Ayuso et al., 2011), and seizing capability (Mousavi et al., 2018). Furthermore, such works provide only a partial understanding since contextual contingencies, which innovation capabilities are subject to, are all but excluded (Evanschitzky et al., 2012; Henard & Szymanski, 2001). Consequently, we examine market-based capabilities in relation to potential endogenous and exogenous conditions as co-determinants of sustainable innovation. Consequences of sustainable innovation The consequences of sustainable innovation have been studied even less than antecedents (Table 1). A handful of works have examined very broad impacts like organizational performance (Maletic et al., 2014), or quite narrow like consumer resistance to natural gas vehicles (Wiedmann et al., 2011). Curiously, the triple bottomline as an outcome of sustainable innovation has not been investigated, despite looming large in the sustainability discourse (DesJardins, 2015). The triple bottomline has stimulated much discussion since introduction as a management ideal and accounting principle. While some have questioned its value, the concept has firmly entered the business lexicon, and been adopted as a high priority by a growing number of companies (Elkington, 2018; Norman & MacDonald, 2004; Pava, 2007). Understanding triple bottom-line outcomes would help managers decide on developing sustainable innovations or not, given their greater costs and challenges. 4 K. WEIDNER ET AL. An added complexity is that the bottom-line’s components appear at odds with one another, raising the prospect of choosing between business preservation and societal welfare (Ozanne et al., 2016). How should firms manage the tensions? Does for instance advancing ecological causes mean lowering profits in a zero sum game? Or is pursuing all three goals synergistically generative, representing a win-win-win (Elkington, 1994)? To begin to answer such questions, we study sustainable innovation’s contributions if any to the firm’s triple bottomline, and resulting relationships among social, economic, and ecological performances. Theoretical foundations and conceptual framework Market-based capabilities theory Given the above state of knowledge, we develop a framework anchored in two relevant theories. The first is market-based capabilities theory (Day, 1994), which posits that organizational activities such as developing sustainable innovations for markets rests on complex bundles of skills and knowledge known as capabilities (Day, 1994, p. 38). According to Day (1994), capabilities are reflected in processes or activities carried out to move products and services along the value chain, and several of these need to be superior in order to compete well in the marketplace. Three kinds of capabilities together produce competitive advantage and superior performance: outside-in, spanning, and insideout capabilities. Outside-in capabilities, such as market sensing, connect the firm to its external market by sensing and anticipating external requirements. Spanning capabilities, such as new product development, integrate outside-in with inside-out capabilities, and cross functional boundaries in order to fulfill market requirements. Inside-out capabilities, such as transformation processes, are those that are “activated by market requirements, competitive challenges, and external opportunities” (Day, 1994, p. 41). Critically, all three capabilities are present for a firm to function well. In accordance with this theory, our framework integrates all three types of capabilities – outside-in, insideout, and spanning – for positive functioning. Also consistent with the theory, each capability construct represents a single type rather than a mix of the three kinds, and is reflected in activities or processes undertaken by the firm. Furthermore, due to our interest in sustainable innovations for markets, our framework reflects organizational efforts to address customer requirements while considering other stakeholders’ interests. Customers say they are increasingly interested in buying goods and services for not only feature and cost performance, but also environmental and social impacts (Balderjahn et al., 2018; Huang & Rust, 2011; Ramirez, 2013). Firms are responding by creating and offering sustainable innovations attuned to these shifts in purchase behavior (Crittenden et al., 2011; Varadarajan, 2015). Because other stakeholders such as government entities, the general public, and shareholders are similarly interested in these new offerings, with some favoring and others opposed to sustainability, firms will weigh and address the needs and preferences of these other groups with those of customers to varying degrees. In our study, we examine specifically the consideration of customers visà-vis non-customer stakeholders. Finally, market capabilities theory suggests both endogenous and exogenous conditions are contingencies for sustainable innovation, given an internal and external lens on firm capabilities. Stakeholder theory The second theory we draw on is stakeholder theory by Freeman (1984), who asserts that a firm exists within a web of groups with different stakes in its activities. The web represents complex ties that firms must consider, sometimes leading to deliberate compromises of one group’s agenda or preferences in favor of another. Thus for example, creating an inexpensive new product out of polluting plastics satisfies economy-minded consumers, but upsets environmentalists expecting the product to have a low-carbon footprint. Such choices represent moral dilemmas with harms and helps varying by affected party (Parmar et al., 2010; Phillips, 2003). Stakeholder theory proposes that business actions have distinct implications for each group, and that optimal business functioning occurs when firms consciously attend to these consequences rather than adopt only the priorities of owners (Freeman, 1984). We apply this theory to our study by incorporating constructs and relationships in our framework that reflect firms keeping multiple stakeholders in view as they enact sustainable innovation. This view involves understanding and responding to the needs of different groups, such as those of customers, governments, employees, and the general public, as well as recognizing possible tradeoffs while moving ahead to deliver on competing demands. We expect in maintaining this perspective–rather than valuing firm-centric material gains above all else as occurs under a classic economistic philosophy (Melé, 2003)–sustainable innovation is promoted and produces triple bottom-line rewards. The economistic philosophy asserts that short-term profit and shareholder maximization are the reigning goals, JOURNAL OF MARKETING THEORY AND PRACTICE without need to balance them against humanistic interests (Pirson & Lawrence, 2009; Pirson & Turnbull, 2011). By contrast, under stakeholder theory, businesses flourish when larger interests outside their boundaries are consciously considered and managed (Freeman, 1984). Conceptual framework In our framework sustainable innovation is interpreted in a more expansive sense as the generation, design, and implementation of a new or improved product, service, or process that incorporates a concern for social equity and environmental integrity without sacrificing economic prosperity (Brundtland Commission, 1987; Elkington, 2004; Varadarajan, 2015). Per the marketbased capabilities theory it is a boundary-spanning capability in that distinct functions, units, and employees coordinate their efforts to materialize it. To address the issue of capabilities and contingencies affecting sustainable innovation, we examine several possible antecedents. The first is market-based sustainability, an outside-in capability that is the strategic alignment of, and attention to, the desires of customers with the social, economic, and environmental concerns of other stakeholders (Hult, 2011). It thus represents the firm’s recognition of differing stakeholder interests and efforts to reconcile them through alignment practices, consistent with stakeholder theory. We further posit that this capability’s effect is contingent on public ownership, or whether or not a firm is publicly held. Public firms are more exposed to and thus may be required to be more responsive to outside stakeholders than private companies, reflecting an external condition incorporated in the framework. A second capability is organizational learning, or the firm’s development of new knowledge with the potential to influence behaviors (Argyris & Schön, 1978) or improve performance and strengthen competitive advantage (March, 1991). Per market capabilities theory it is an outside-in capability, as it is an activity that is “activated by market requirements, competitive challenges, and external opportunities” (Day, 1994, p. 41). We include it since learning about stakeholders opens the firm to new ways of invention. Embarking on sustainability projects often entails assuming alternative views and practices. A third capability is the inside-out capability of unlearning, or the discarding of existing knowledge and routines, which is distinct from though associated with learning (Fiol & O’Connor, 2017; Tsang, 2017; Tsang & Zahra, 2008). Unlearning may work in critical tandem with learning by removing barriers to sustainability ideas and concomitantly elevating the 5 impact of those ideas on innovation. It is particularly relevant when organizational memory needs renewal or change, as in the case of sustainable innovation and other state-of-the-art initiatives(Starbuck, 2017; Yang et al., 2014). We theorize that learning depends on the internal condition of unlearning, in that absorbing new information requires putting aside temporarily that which is no longer appropriate. Critically, the framework incorporates the triple bottom-line, or the firm’s social, economic, and environmental performances (Elkington, 1994, 1997), as consequences of sustainable innovation. We propose the relationships among components is not straightforward, with each a direct outcome of sustainable innovation; rather, we theorize a nuanced set of positive interlinkages whereby social and environmental performance are initial impacts, which then affect economic performance. These relationships are summarized in Figure 1 and detailed in the hypotheses section. Hypothesis development Firm capabilities and conditions for sustainable innovation As governments, shareholders, activists and other groups chime in on the obligations and actions of businesses – voices amplified in this age of social media – firms that keep their heads in the sand can find themselves isolated and irrelevant (Kotler, 2011). Marketbased sustainability represents the firm’s ability to look up and out into the field of buyers and other constituencies, responding to pressures to fulfill often conflicting agendas. It also represents a contrast with traditional views of firm capabilities, such as the well-researched market orientation, in not serving the market myopically to the exclusion of all other entities (Freeman, 1984; Hult, 2011). Critically, the concept does not jettison the market or profits from its view; instead, it keeps customers, who are central to an innovation’s market acceptance and financial viability, with other groups in clear sight. We theorize this capability is especially helpful in creating sustainable innovations. Per market-based capabilities theory, firms thrive when they have a sensing capability that permits anticipating and addressing evolving external needs. Such a capability guides organizations to undertake behaviors ensuring value creation for the market and hence superior performance (Day, 1994; Narver & Slater, 1990). Since market-based sustainability is attuned to understanding the social, economic, and environmental interests of customers relative to those of other groups, the skills and knowledge involved can be 6 K. WEIDNER ET AL. Public Ownership (PUB) Triple Bottom Line Performance H2 H1 Market-Based Sustainability (MBS) H5 SUSTAINABLE INNOVATION (SI) Organizational Learning (OL) H3 Environmental Performance (ENVPERF) H7 Economic Performance (ECONPERF) H6 Social Performance (SOCPERF) H8 H4 Organizational Unlearning (OU) Control Variables Figure 1. Sustainable innovation conceptual model and hypotheses. applied to developing sustainable innovations. As the number, range, and complexity of stakeholder perspectives increases through market-based sustainability, firms broaden their information intake and are better poised to weigh divergent pulls to arrive at solutions that satisfy multiple, often clashing interests (Ayuso et al., 2011; Ketata et al., 2014). Furthermore, market-based sustainability enables a firm to not only understand, but as a higher level capability also align varying demands to meet social, economic, and environmental expectations (Day, 1994; Hult, 2011). Alignment involves prioritizing demands, compromising among a subset of options, and making intentional tradeoffs in order to arrive at workable innovations. Stakeholder dialogue, a two-way communication between the organization and each stakeholder group, may be one mechanism to materialize alignment (Ayuso et al., 2006). In sum, we predict market-based sustainability aids the ability to innovate products, services, and processes with sustainable features. H1: Market-based sustainability is positively related to sustainable innovation Stakeholder theory posits that multiple groups have contrasting and shared views about the strategies and impacts of businesses, and that firm value is best created when managers simultaneously account for these perspectives (Freeman, 1984). Yet shareholders at times have an outsized influence on managerial decision making in publicly held companies, where the stock market is the final arbiter of firm value, investor returns, and economic welfare. Although stakeholder theory does not argue firms should ignore shareholders, it does question the orthodoxy of allowing shareholder preferences to supercede all others (Freeman et al., 2010). When it comes to sustainable innovation, which for many businesses is a longer-term, higher-risk, and more comprehensive effort compared to traditional innovation, firms may find themselves in the crosshairs of serving shareholders seeking quick profit maximization from easy line extensions versus satisfying stakeholders wanting difficult issues such as climate change and social inequities addressed through truly new innovations. We therefore consider how public ownership may impact innovation by interacting with the capability of market-based sustainability. Specifically, we probe how public ownership may act as a contingent influence on sustainable innovation when the firm is attempting to satisfy varying stakeholder requirements, among which those of investor-owners may be the loudest and most persistent. Public ownership has been investigated as a moderator of other sustainability-related activities, such as corporate social responsibility directives (Ali et al., 2019), corporate public transparency (Li et al., 2019), and sustainability policy reporting (Gallo & Christensen, 2011); however, its moderating role in sustainable innovation is still not known. Because publicly held firms are conditioned to meet the profitability demands of shareholders, the marketbased capability may have a weaker impact on sustainable innovations. Several studies suggest that public companies are more tepid about chasing sustainability, such as through “greening” activities, since these are JOURNAL OF MARKETING THEORY AND PRACTICE perceived (or misperceived) as generating low to negative returns (Berrone et al., 2013; Papadas et al., 2017). However, there are more reasons to posit the opposite is true. One reason is that as public awareness of societal, ecological, and financial problems grows, consumers appease their conscience by making purchases that benefit the earth and socially marginalized (Balderjahn et al., 2018; Huang & Rust, 2011). Because companies in the public eye are more top of mind and better known, buyers consider them more readily for purchases and thereby prod such businesses to produce sustainable goods and services. In this regard, businesses are rewarded for taking on the risks and costs of developing sustainable innovations in the form not only of higher financial and market performance, but also stronger brand reputation and loyalty that comes with corporate social responsibility. Another reason public ownership may strengthen the market-based sustainability and sustainable innovation relationship is accountability. Firms with shareholders are more apt to make public commitments to sustainability via annual reports, company websites, and social media. With these statements come scrutiny from regulatory groups, social agencies, and shareholder communities, who are increasingly skilled at monitoring whether businesses are living up to their promises (Unruh et al., 2016). As a consequence, being in the public eye likely elevates accountability, such that market-based sustainability leads to sustainable innovations. High-sustainability firms have been found to consistently outperform other companies in stock market performance and other financial measures, suggesting public accountability adheres firms to stated commitments (Eccles et al., 2011). Therefore, we hypothesize that public ownership strengthens the relationship between market-based sustainability and sustainable innovation, acting as a contingency of the sustainability capability. H2: Public ownership positively interacts with market-based sustainability onto sustainable innovation. Organizational learning is an outside-in capability of acquiring and sharing information to produce new insights for firm benefit, including for creating more market-attuned offerings. (Argyris & Schön, 1978; Day, 1994). Outlined nearly sixty years ago by Cyert and March (1963) as processes of learning through interacting with the environment that forms collective memory, the construct has garnered steady attention over the years for its significant role in a host of firm consequences (Daft & Weick, 1984; Mena & Chabowski, 2015). Among impacts 7 is firm performance (Anderson & Lewis, 2019). This occurs because learning changes the knowledge base as a function of the firm’s own experience or absorbing the experiences of others (Argote, 2015; Piperopoulos et al., 2018). Reformulation of knowledge in turn facilitates behavior change, allowing the firm to advantageously position itself relative to competitors, exploit market opportunities, and adapt to technological evolutions (Sinkula, 1994; Slater & Narver, 1995). Beyond firm performance, another impact of organizational learning may be sustainable innovation. Organizational learning provides the content for the production and transformation of knowledge, and thus serves as the mechanism by which mental models of sustainable innovation are created, along with shifts in organizational cultures to speed the acceptance of ideas and perspectives such as diverse stakeholder preferences (Argyris & Schön, 1978; Dovey, 2009). In this way, the firm increases its ability to create inventions addressing a range of social, economic, and environmental concerns. Put differently, the learning brings in new knowledge to develop original yet practical forms of innovation and sustainability. Even new combinations of knowledge can enable novel associations and sprout innovations (Baker et al., 2015; Harmancioglu et al., 2010; Molina-Morales & Martínez-Fernández, 2009). Although the tie of learning to organizational innovation has been conceptualized (Nonaka, 1994), empirical evidence of a linkage to sustainable innovation is lacking. As discussed earlier, sustainable innovation is unlike traditional innovation in that the firm must manage a panoply of stakeholder demands as well as its own priorities. Researchers have investigated the impact of learning culture on innovative culture (Hurley & Hult, 1998), and of stakeholder information acquisition on novel stakeholder practices (Mena & Chabowski, 2015). Organizational learning may strengthen a firm’s assimilative capacities to acquire information about sustainability, and thereby spur innovative behaviors to embed sustainability in products and services or modify processes and systems (Cohen & Levinthal, 1990; Jimenez-Jimenez & Sanz-Valle, 2011). Yet the question of organizational learning’s influence on sustainable innovation remains. We therefore propose to study it in the following form, positing a positive impact given the benefits of organizational learning noted above: H3: Organizational learning is positively related to sustainable innovation. While organizational learning is generally seen as helpful to firms, scholars recognize its limits. It has been pointed out that adaptive or single loop learning 8 K. WEIDNER ET AL. is a process that stays within boundaries, as reflected in assumptions firms hold about themselves and their environments (Argyris, 1977; Senge, 1990). Yet such a process may have unintended consequences. Accumulated knowledge from single loop learning may create core rigidities, competency traps, as well as inertia, all of which hamper innovation (Leonard-Barton, 1999). Organizational resistance can result and form a bulwark against sustainable innovation, which involves revisiting and altering established decision-making rules as well as immediate and long-term goals. Researchers have observed a similar down side to exploitative learning. This kind of learning centers and builds on current knowledge, extending known competencies, technologies, and paradigms (March, 1991). While constructive for efforts relatively familiar or close to home, exploitative learning may on its own tether firms to innovation as usual (Atuahene-Gima & Murray, 2007; Katila & Ahuja, 2002). Sustainable innovation, however, requires entering new territory by questioning and adjusting existing routines. Firms that rely on and continue to build current knowledge stockpiles may reject information that could disturb established ways of doing things (Anderson & Lewis, 2019; Cho & Kim, 2017). Due to limitations in organizational learning, another learning capability is called for that provides different yet complementary knowledge (Snihur, 2018; Yang et al., 2014). This knowledge should enable revisiting current assumptions and arriving at alternative understandings of mission, customers, and strategy (Argyris, 1977; Senge, 1990). Furthermore it should encourage experimentation instead of only incremental actions. Importantly, this other capability does not completely remove and replace the learning that has already occurred, but permits altering and augmenting that knowledge (Atuahene-Gima & Murray, 2007; March, 1991). The capability we suggest is organizational unlearning, which was introduced as critical for the proper functioning of organizational learning by Hedberg (1981) nearly forty years ago. Organizational unlearning focuses on the discarding of knowledge and practices in order to make way for new ones. In other words, unlearning prepares the ground for fresh frames and approaches. Importantly, unlearning is distinct from and not subsumed by organizational learning (Tsang & Zahra, 2008). Though the notion of discarding implies all knowhow and methods are destroyed, unlearning is more accurately described as refraining from drawing on old and less appropriate patterns of insight-gathering and problem-solving (Tsang, 2008). Because sustainable innovation is disruptive in that nearly every aspect and activity of the value chain can be revisited and changed if the resulting invention is to be truly sustainable, it can render certain assumptions, principles, and views as less pertinent and possibly obsolete (Anderson & Lewis, 2019; Polidoro, 2013). Importantly, prior ways are not permanently or entirely scuttled, but only temporarily put aside in part and over time into organizational memory to accommodate new approaches (Fiol & O’Connor, 2017; Moorman & Miner, 1997). As noted by learning scholars, routines can become ossified and so deeply entrenched that they are taken for granted even when they no longer apply, providing foundations for organizational interests (Feldman, 2000; Feldman & Pentland, 2003; Tsang & Zahra, 2008). In this regard, unlearning works alongside or in tandem with learning, functioning as a complementary inside-out capability. We theorize that unlearning may function specifically as a contingency of learning. Because firms are prone to stagnation if they never question current practices, unlearning provides a check by forcing a deliberate reflexive reexamination (Sinkula, 1994; Tsang & Zahra, 2008). While momentarily destabilizing, unlearning leads to reconsidering whether the firm is well situated for the future, and therefore provides a critical condition for learning (Fiol & O’Connor, 2017). In relation to sustainability, unlearning may prepare employee mindsets to seek and absorb new ways of designing, making, and selling environmentally friendly and socially conscious innovations. Suggestive is research demonstrating that unlearning is required for firms to revitalize their businesses, and occurs between cycles of learning when developing new products (Maidique & Zirger, 1985; Starbuck, 2017). In light of the above, we posit a positive interaction as follows. H4: Organizational unlearning positively moderates the relationship between organizational learning and sustainable innovation. Triple bottom-line outcomes of sustainable innovation Per Day’s theory, sustainable innovation is a boundaryspanning capability whereby outside-in and inside-out capabilities are integrated to achieve strategic aims. Critically, innovation achieves competitive advantage due to the tacit, difficult-to-imitate nature of managing horizontal processes across the organizational span (Barney, 1991; Day, 2011). To the extent innovation is done well, superior performance results (Day & Wensley, 1988). But what performance superiorities are expected from sustainable innovation? JOURNAL OF MARKETING THEORY AND PRACTICE According to stakeholder theory, expanding a firm’s responsibilities beyond the obligations of shareholder welfare produces stress between financial and nonfinancial objectives (Parmar et al., 2010). The stress is observable in the reported ambivalence managers have about sustainability, many believing it is unprofitable to implement (Kiron et al., 2013). If sustainable innovation dampens a firm’s financial performance, some managers may conclude it is itself unsustainable. Others, however, may put aside such existential matters and continue their commitment to sustainability through practical maneuvers (Harrison et al., 2010). Recent scholarly discussions acknowledge sustainability’s triple bottom-line is a desired ideal but an unconfirmed reality. Consequently, calls have been made to examine it empirically and isolate the three dimensions separately to understand potential inter-dynamics (Ozanne et al., 2016; Van der Byl & Slawinski, 2015). Sustainable innovation is clearly rooted in social and environmental objectives, distinctives of this form of innovation over others. As employees work on creating the original products, services, and processes, they are aware of and guided by these mandates. In other words, the objectives help motivate and coordinate the intricate human activities to deliver the promised social and ecological features in the innovation (Day, 1994, 2011). We thus expect that the capability of sustainable innovation is directly tied to a firm’s social as well as environmental performance. H5: Sustainable innovation is positively related to environmental performance H6: Sustainable innovation is positively related to social performance Economic performance may be a different matter. Financial returns are more uncertain in pursuing sustainability: while buyers more consistently seek good prices and purchase value, they do not necessarily require or want products that help people and the planet (Crosno & Cui, 2014; Margolis & Walsh, 2003; Mish & Scammon, 2010; Ramirez, 2013; Wiedmann et al., 2011). Yet financial returns are not always jeopardized by the pursuit of social or environmental causes, and may in fact increase as a consequence (Dyllick & Hockerts, 2002; Figge & Hahn, 2001). Per capabilities theory, firms that develop assets to obtain a positional advantage in the market ultimately reap superior financial rewards (Day, 1994). Social and environmental outcomes of sustainable innovation can form this advantage (e.g., by distinguishing a firm’s products from competitor’s), and in so doing generate superior economic rents. For 9 example, incorporating recycled materials heightens a product’s reputation in the market, which in turn strengthens sales and profitability in a virtuous cascade (Evans et al., 2017). Studies also suggest that social and environmental gains enhance buyer satisfaction, brand loyalty, product awareness, and customer-firm identification, all of which promote sales, profitability, and return on investment, i.e. economic performance (Luo & Bhattacharya, 2006; Ramirez, 2013). From a risk management perspective, superior eco-socio performance generates firm moral and social capitals (Harrison et al., 2010; Varadarajan & Menon, 1988). As stakeholders view the firm as good and trustworthy through its sustainable innovations, moral and social capitals provide an insurance-like protection against public activism and regulatory scrutiny that would otherwise dampen shareholder wealth (Luo & Bhattacharya, 2009; Varadarajan, 2015). In sum, we predict economic performance is elevated by and tied to the other two dimensions of the triple bottom-line. H7: Environmental performance is positively related to economic performance H8: Social performance is positively related to economic performance Methodology Sample selection and data collection To test the conceptual framework and proposed hypotheses, we surveyed strategic business units (SBUs) that have worked on sustainable innovations. Data collection occurred in two steps. First, members of four LinkedIn innovation groups were invited to participate in the study by receiving a recruitment message from the groups’ owners. An incentive was offered of winning one of two 150 USD gift cards in a raffle. Members were provided with a link to Part 1 of the online survey, which consisted of demographic questions as well as qualifying the SBU if it had worked on a sustainable innovation sometime in the past two years. Upon completing Part 1, respondents were emailed a link to Part 2 of the online survey, which provided the remaining questions on the focal, antecedent, consequent, contingent, and control variables. A total of 1,063 individuals representing distinct firms were sent Part 1, out of which 272 or 26% qualified and completed it. Thereafter 225 participants clicked on Part 2, and 132 completed it and provided usable cases. Seventy-seven percent of the respondents identified themselves as an owner, executive, or manager overseeing 10 K. WEIDNER ET AL. the innovation program within the SBU (or firm if no SBUs), indicating that the great majority belonged to the managerial ranks. The remaining 23% self-identified as innovation team members. On average, participants had worked in their SBUs for 6.6 years, ranging from 1 to 32 years. Respondents were predominantly male (67%) and college educated (46% had a master’s degree, and 8% a professional or doctoral degree). Regarding the SBUs that completed the survey, most had worked in the past two years on sustainable new products or services (92%) or sustainable new processes (71%) involving supply chain, manufacturing, marketing, management or other business areas. Collectively, the SBUs represented all 10 major SIC codes. Geographically, about two-thirds were based in North America (65%), while the rest were from Europe and Australia (35%). Additionally, the sample represented both private and public firms (26% and 74%, respectively), and employers of more than 1,000 workers (25%) as well as fewer (75%). Measures Where possible, study measures were adapted or adopted from the existing literature. All questions were asked with respect to the SBU (or firm if no SBU), with answers on a 7-point scale unless noted. The measures are detailed in Appendix A. Besides measures for the seven constructs previously defined, three control variables (market turbulence, firm size, and firm nationality) were used. Market turbulence was captured by a measure of three items adopted from Moorman and Miner (1997). Firm size was the log value of employee size. For nationality, SBUs were dummy coded as 1 (U.S.) or 0 (non-U.S.), while for public ownership firms were also dummy coded as 1 (public) or 0 (not public). Sustainable innovation was captured by a measure of six items reflecting generating, designing, and implementing new sustainable products, services, and processes. All items loaded well on the intended construct and were retained through the purification process. The resulting measure had a Cronbach alpha of .95 and composite reliability of .96, exceeding standard cutoffs. Market-based sustainability was measured with a scale consisting of six items. The scale assesses the extent to which customers’ needs are balanced with the environmental, social, and economic concerns of shareholders, governments, the larger public, and other stakeholders, and the extent to which the SBU strives to meet the needs of customers while considering other stakeholder concerns. All items loaded on the intended construct, resulting in a measure with a Cronbach alpha of .89 and composite reliability of .91. The organizational learning measure was adapted from Sinkula et al. (1997) and Zhou et al. (2005) for the sustainability context of this study. With an intention to contain the length of this online survey, three of the original items that were reported with higher factor loadings in Zhou et al. (2005) were used in this study but reworded to describe the extent of acquiring and exchanging sustainability knowledge in the organization as learning behaviors (Sinkula et al., 1997). The three items loaded well on the expected construct, and the resulting scale surpassed reliability thresholds (Cronbach alpha of .76 and composite reliability of .87). Organizational unlearning was captured by an eightitem scale that reflects the extent to which the SBU as well as its employees assess, evaluate, discard, and set aside prior knowledge and routines. One low-loading item was removed, resulting in a measure with a Cronbach alpha of .91 and composite reliability of .92. Consistent with previous sustainability research (see a meta-analysis report by Orlitzky et al. (2003)), multiitem measures were employed to assess the triple bottom-line in this study regarding economic, social, and environmental performances. For economic performance, we adapted the Zhou et al. (2005) subjective measure of financial performance to assess the SBU’s previous two years of ROI, profitability, market share, and sales revenues relative to those of the closest competitors. All four items were retained through the purification process, resulting in a measure with a Cronbach alpha of .91 and composite reliability of .94. To capture the social and environmental dimensions of the triple bottom-line, we adjusted the social and environmental performance scales by Bansal (2005). Since the original scales indicate the presence or absence of environmental integrity and social equity, we converted each item to a Likert scale and rephrased questions to reflect social and environmental performances over the past two years relative to those of closest competitors. All items were retained through purification. The social performance scale had a Cronbach alpha of .92 and composite reliability of .94, while economic performance measure produced a Cronbach of .88 and reliability of .93. Measurement procedures A confirmatory factor analysis (CFA) of all multipleitem constructs was done in a covariance-based structural equation model (SEM) with LISREL to assess the reliability and validity of the measurement model. Error terms of several measures coming from the same construct were freed for estimation. After removing low- or cross-loading items (Hair et al., 2009), JOURNAL OF MARKETING THEORY AND PRACTICE 11 Table 2. Mean, standard deviation, square root of average variance extracted, and correlation matrix of variables. Variables 1. Sustainable Innovation 2. Market-based Sustainability 3. Public Ownership 4. Org Learning 5. Org Unlearning 6. Environmental Performance 7. Social Performance 8. Economic Performance 9. Market-based Sustainability × Public Ownership 10. Org Learning × Org Unlearning Mean 5.49 5.67 – 4.09 5.31 5.32 4.85 4.75 – – S.D. 1.21 .91 – .76 .98 1.11 .95 1.08 – – 1 (.89) .51 −.18 .52 .65 .51 .24 .04 −.23 −.38 2 3 4 5 6 7 8 9 10 (.80) −.05 .44 .42 .43 .33 −.02 −.12 −.22 – −.09 −.10 −.13 −.05 .08 −.04 −.12 (.83) .54 .50 .33 .03 −.04 −.32 (.80) .48 .40 .09 −.09 −.36 (.93) .43 .23 −.12 −.32 (.84) .40 −.23 −.19 (.87) −.16 .02 – .07 – The diagonal (in italics) shows the square root of the average variance extracted (AVE) for multi-item constructs. indices indicated a good overall fit of the measurement model: χ2 = 907.27, df = 479, Root Mean Square Error of Approximation (RMSEA) = .067, Comparative Fit Index (CFI) = .957. Each measurement item had a significant loading on its expected latent construct (all t’s > 6.14, p’s < .001). Following a recommended measurement validation procedure (MacKenzie et al., 2011), reliability and validity of measures were determined. Each scale manifested a Cronbach alpha of at least .75 and composite reliability of at least .90, exceeding reliability requirements (Bagozzi & Yi, 1988). The values of average variance extracted (AVE) for the multi-item constructs ranged from .64 to .87 (see Table 2), all above the recommended level of .50 (Bagozzi & Yi, 1988). To assess discriminant validity, all pairs of constructs were examined by detecting significant chi-square differences between two models, one constraining the correlation between the two constructs to one and the other with the correlation free. All pairwise CFA tests generated significant chi-square differences, indicating sufficient discriminant validity. In addition, each measure’s square root of AVE was higher than the coefficient for any pair of two latent variables, also indicating discriminant validity (Fornell & Larker, 1981). Due to the self-reported nature of the data, there was a potential for common method variance. A test was therefore performed on the full measurement model with LISREL in which a common latent factor was incorporated following the procedures outlined by Podsakoff et al. (2003) and Williams et al. (1989). The results showed that while the inclusion of the method factor improved model fit, the factor accounted for an average of 26% of total variance, a level similar to the reported average acceptable level of common method variance in the previous literature (as reported by Williams et al., 1989 based on 70 MTMM studies). The model structure also remained the same after controlling for method variance. These findings suggested common method bias was not a major concern in this study. Final items with factor loadings, Cronbach alphas, and composite reliability values after purification are detailed in Appendix 1. Prior to hypotheses testing, we estimated the possible presence of multicollinearity. Per Mason and Perreault (1991), we assessed multicollinearity by regressing each predictor variable on the other predictor variables to detect linear relationships among the variables. None of the R-squares for the relationships among the predictor variables exceeded the R-square of the overall model (for example, the highest R-square between two predictors for sustainable innovation was .29, much lower than its R-square of .55 in the path model). These findings indicated a low possibility of multicollinearity. Consistently, the maximum variance of inflation factor (VIF) score in the following regression models was 1.43, much lower than the suggested cutoff value of 5 recommended by O’Brien (2007) and Belsley et al. (1980). Therefore, we concluded that multicollinearity was not a problem for the hypothesized model. Control variables For model testing, we included four control variables on sustainable innovation: SBU size, market turbulence, and nationality. The public nature of the business (dummy variable, 1 = public and 0 = private) was also added as a control variable on the three performance variables. The control variables reflected potential internal and external influences on innovation or business performances, as suggested in previous studies (Chen et al., 2015; Dangelico et al., 2013; Unruh et al., 2016). Hypothesis testing procedure Seemingly unrelated regression (SUR), which Zellner (1962) developed for estimating theoretically related sets of equations, was used to estimate the model in STATA. In the context of this study, the error terms of 12 K. WEIDNER ET AL. the different equations related to social, economic, and environmental performances of sustainable innovations could be correlated, as could the independent variables. In addition, some common factors, such as a prosustainability bias among the respondents, might influence the errors in three performance outcomes similarly. Previous innovation research has used SUR to overcome the potential issue of related error terms across equations (Fang, 2008; Piva et al., 2005; Zhang et al., 2015). Thus, we selected SUR as a more appropriate and efficient estimation method than ordinary least squares (OLS) (Johnston & DiNardo, 1997; Zellner, 1962). A mean-centered approach was employed to formulate the interaction terms, reducing concern of multicollinearity (Aiken et al., 1991). The model of four equations for hypothesis testing is specified below. SI ¼β0 þβ1 MBSþβ2 PUBþβ3 OLþβ4 OU þβ5 MBS � PUBþβ6 OL � OU þβ7 SIZEþβ8 NATION þβ9 MRKTUBþe1 (1) ENVPERF ¼ β0 þ β1 SI þ β2 PUB þ β3 SIZE þ β4 NATION þ β5 MRKTUB þ e2 (2) SOCPERF ¼ β0 þ β1 SI þ β2 PUB þ β3 SIZE þ β4 NATION þ β5 MRKTUB þ e3 (3) ECONPERF ¼ β0 þ β1 ENVPERF þ β2 SOCPERF þ β3 PUB þ β4 SIZE þ β5 NATION þ β6 MRKTUB þ e4 (4) The means, standard deviations, square root of AVE values, and Pearson correlation matrix for all variables at the construct level are shown in Table 2. Results Table 3 summarizes the findings of the SUR tests. The multiple-equation model provided explanation for 55% of the variance in sustainable innovation, indicating that our model offered an important interpretation for its formation. The model also explained 23%, 9%, and 20% of the variance in environmental, social, and economic performances, respectively. Hierarchical regression analyses were conducted as a supplement, the results of which highly converged with those of the SUR analysis (available from authors). We proposed in the first hypothesis that marketbased sustainability is positively related to sustainable innovation. The result shows the regression coefficient is significant (b = .40, p < .001), providing support for H1. In the second hypothesis we posited that public ownership positively interacts with market-based sustainability to affect sustainable innovation. The coefficient of the interaction term .54 was significant (p < .001), supporting H2. Regarding public ownership, we conducted a supplemental test on this moderating effect using the “by Pub, sort:” command in SUR test. The path coefficient of market-based sustainability on sustainable innovation was insignificant (b = .13, z = 1.40, p = .162) for private firms, but positively significant (b = .63, z = 4.47, p < .001) for public firms. Following guidelines by Paternoster et al. (1998), we conducted a z-test on the difference between the two scopes. The test result confirmed the significance of the positive moderating effect of business ownership (z = 2.96, p = .002). In addition, there was no overlap between the lower to higher bounds of the coefficients between the two groups using the confidence set approach (95% confidence ranges were −.05 to .31 for private SBUs and .36 to .91 for public SBUs, respectively). All the test results confirmed the prediction of H2. According to H3, organizational learning is positively related to sustainable innovation. Our finding showed this link to be significant (b = .18, p = .035), so H3 was supported. In H4, the impact of organizational learning was hypothesized as amplified by organizational unlearning. Though organizational unlearning was found to have a significant positive direct effect on sustainable innovation (b = .66, p < .001), it had a negative interaction with learning (b = − .19, p = .031). Hence H4 was not supported. The interaction pattern suggested that organizational learning’s contribution to sustainable innovation is stronger when unlearning is lower than higher. We consider this finding further in the discussion section. None of the control variables of firm size, market turbulence, or country location had significant association with sustainable innovation, implying that the success of sustainable innovation is equally achievable by firms of various sizes, regions, and market dynamism. Next, we expected in H5 and H6 that sustainable innovation contributes to environmental performance and social performance, respectively. The results showed that sustainable innovation had a significant positive impact on environment performance (b = .47, p < .001) as well as on social performance (b = .30, p < .001). Hence both H5 and H6 were supported. In addition, analysis of control variables showed that U.S. firms in general show marginally higher environmental performance than non-U.S. firms (b = .33, p = .054). Meanwhile, public firms showed lower social performance (b = − .45, p = .025), whereas larger size businesses achieve significantly higher social performance (b = .07, p = .027). JOURNAL OF MARKETING THEORY AND PRACTICE 13 Table 3. Results of Seemingly Unrelated Regression (SUR) for hypotheses testing. Dependent Variable Sustainable Innovation (Weighted R2 =.53) Independent Variables Intercept MBS PUB OL OU MBS × PUB OL × OU LOGSIZE NATION MKTTURB b .08 .40 −.30 .18 .66 .54 −.19 −.03 .02 −.04 z score .94 4.61*** −1.75# 2.11* 7.61*** 3.18*** −2.16* −1.29 .14 −1.57 Environmental Performance (Weighted R2 =.23) Intercept SI PUB LOGSIZE NATION MKTTURB 2.52 .47 −.36 .03 .33 −.00 3.32*** 5.75*** −1.59 .95 1.93# −.03 Social Performance (Weighted R2 = .09) Intercept SI PUB LOGSIZE NATION MKTTURB 2.73 .30 −.45 .07 −.02 .02 3.98*** 4.01*** −2.23* 2.21* −.13 .65 Economic Performance (Weighted R2 = .20) Intercept ENVPERF SOCPERF PUB LOGSIZE NATION MKTTURB .90 .23 .23 .08 .07 .29 .06 1.17 2.73** 2.26* .36 2.00* 1.71# 1.94# Hypothesis H1, supported H3, supported H2, supported H4, not supported H5, supported H6, supported H7, supported H8, supported b is unstandardized coefficient in SUR result. # p < .10; *p < .05; **p < .01; *** p < .005 (two-tailed) *SI = Sustainable Innovation, MBS = Market-Based Sustainability, PUB = Public Ownership, OL = Organizational Learning, OU = Organizational Unlearning, ENVPERF = Environmental Performance, SOCPERF = Social Performance, ECOPERF = Economic Performance. We proposed in H7 and H8 that environmental performance and social performance are positively related to economic performance, respectively. The results confirmed the relationships of environmental performance (b = .23, p = .006) and social performance (b = .23, p = .024) to economic performance. Thus, both H7 and H8 were supported. We also found that stronger economic performance is achieved in larger businesses (b = .07, p = .045), slightly more turbulent market environments (b = .06, p = .065), and among U.S. firms (b = .30, p = .087). To verify the role of environmental and social performance in the linkage between sustainable innovation and economic performance, we followed Baron and Kenny’s (1986) four-step guideline to test their potential mediating effects. Our results revealed that the significant direct link from sustainable innovation to economic performance (step 1: b = .20, p = .019) was reduced to insignificance (step 4: b = .04, p = .653) when the two mediators – environmental performance and social performance – were added to the model. Meanwhile, environmental and social performances remained positively associated with economic performance (b = .20, p = .026; b = .22, p = .031 in step 4). These tests indicated that the effect of sustainable innovation on economic performance is fully mediated by environmental and social performance (details available from the authors). Discussion To address the critical knowledge gaps in the sustainable innovation literature, we sought to determine the marketbased capabilities fostering sustainable innovation and their internal and external contingencies, as well as sustainable innovation’s impact on and among performance dimensions of the triple bottom-line. Based on a survey of firms, we learned that sustainable innovation is indeed a complex enterprise with potent outcomes. Specifically, sustainable innovation is driven by the capabilities of market-based sustainability and organizational learning, whose respective effects are positively moderated by public ownership and negatively by organizational unlearning. In terms of consequences, sustainable innovation contributes to the triple bottom-line, a long-presumed but unconfirmed relationship. The contribution is not straightforward in that sustainable innovation strengthens the firm’s 14 K. WEIDNER ET AL. environmental and social performances, which then elevates financial performance. In sum, our theorized model largely held up under empirical scrutiny. Our study offers several theoretical implications to marketing scholarship. The first of these is the utility of market-based capabilities and stakeholders theories in predicting and explaining sustainable innovation. Market-based capabilities theory identifies three kinds of capabilities integral to optimal business functioning, including outside-in capabilities that capture the interests of, and thereby value creation opportunities afforded by, individuals, groups, and institutions (Day, 1994, 2011). Stakeholder theory is useful in positing that businesses have moral as well as monetary imperatives, and that tending to both in relation to key stakeholders enables the creation of more value (Harrison et al., 2010; Parmar et al., 2010). As a consequence of these theories, we contribute a new model of sustainable innovation’s antecedents, consequences, and contingencies based on these theoretical perspectives, illuminating sustainable innovation and its benefits for firms. In other words, we offer a more comprehensive portrait of the dynamics of sustainable innovation, specifically how market-related capabilities and relevant conditions produce sustainable innovations, and in turn their resulting triple bottomline rewards. As best we know these two theories have not been applied together in prior empirical examinations of sustainable innovation. A second implication is specification of two new firm capabilities as direct influences on sustainable innovation, namely market-based sustainability and organizational learning. Both are broad-based capabilities that provide the forward-looking organizational lens through which sustainable innovations are perceived and sought. Without such mental frames to recognize evolving customer and other constituent demands for improved social, environmental, and economic features in innovations, and to learn about meeting those demands through new know-how, firms are apt to be remain content with “business as usual” rather than embracing new approaches and opportunities for sustainable innovation (Day, 1994; Hult, 2011). A third implication is the contingent nature of such capabilities. While prior research has identified several capabilities as leading directly to sustainable innovation (Aboelmaged & Hashem, 2019; Mousavi et al., 2018), moderating conditions have not been acknowledged despite innovation literature reviews indicating their criticality in determining capability impacts (Evanschitzky et al., 2012; Henard & Szymanski, 2001). We learned that public ownership, reflecting an externality, positively moderates market-based sustainability, and that organizational unlearning, an internality, negatively moderates organizational learning. Hence the capabilities interact with the exogenous and endogenous context, findings that more holistically portray the determinants of sustainable innovation. One unexpected result was the negative, rather than positive, moderating role of unlearning. We note that while this occurred, unlearning was found to have a significant direct positive impact on sustainable innovation. One potential explanation is firms high on unlearning are engaged in more radical and nonimitative innovation work, which absorbs substantial slack resources such as financial investment, operational experimentation, and job redesign (Nystrom & Starbuck, 1984; Sinkula, 2002; Yang et al., 2014), leaving fewer resources for learning activities. Meanwhile, firms rely less on continuous development for adaptive learning. A similar negative moderation pattern has been found between marketing orientation and learning orientation (Backer & Sinkula, 1999), in which the positive impact of adaptive learning on new product success is suppressed when generative learning is high. Our unexpected finding of the negative interaction between learning and unlearning underscores the complex challenges of sustainable innovation, as well as how learning and unlearning are distinct constructs (not a continuum of a single construct) that affect each other at higher levels (Tsang, 2017; Tsang & Zahra, 2008). A fourth theoretical implication is sustainable innovation’s effects on the triple bottom-line. Scholars acknowledge sustainability’s triple bottom-line is a business ideal, and have called for empirical examination and isolation of the three dimensions to understand their inter-relationships (Ozanne et al., 2016; Van der Byl & Slawinski, 2015). In perhaps the first confirmatory study of such effects from sustainable innovation, we found the triple bottom-line is indeed an outcome. The impacts are all positive, consistent with theorization of synergies among components (Elkington, 1994, 1997). Furthermore, helping to explain the way synergies occur is our result that social and environmental benefits precede and thereby foster economic rewards. Instead of a zero sum between socio-ecological versus financial gains, firms engaged in sustainable innovation experience both sets of gains, representing a both-and dynamic. Managerial implications and future research For marketing managers, the first implication of our study is the importance of possessing all three kinds of market-driven capabilities to derive not only economic but also social and environmental rewards (Day, 1994; JOURNAL OF MARKETING THEORY AND PRACTICE Elkington, 1997; Freeman, 1984): the outside-in capabilities of market-based sustainability and organizational learning, inside-out capability of organizational unlearning and the boundary-spanning capability of sustainable innovation itself. Businesses tend to focus on inside-out activities; however, without the matching or corresponding outside-in and boundary-spanning capabilities to observe and act upon market opportunities, firms can be blindsided by competitors’ actions as well as ignore critical shifts in customer preferences (Day, 1994, 2011). Market-based sustainability is an especially potent outside-in capability. It can be easily overlooked since market orientation would appear to be sufficient. Yet market-based capability goes beyond meeting customers’ needs by accounting for their interests vis-a-vis other key stakeholders. In this regard, it is a higher-order capability (Crittenden et al., 2011; Hult, 2011; Mitchell et al., 2010). All three kinds of capabilities are co-present to produce triple bottom-line rewards. The second implication is the importance of learning to develop sustainable innovations. Because sustainable innovation challenges conventional practice, it is essential that both organizational learning and unlearning occur for socially and ecologically sensitive products, services, and processes to be developed. In other words, firms must purposefully take a fresh look at assumptions about and routines of innovating, and then reconfigure aspects if warranted, including sourcing materials and manufacturing procedures. These results can be explained from the vantage point of radical innovations, which also require firms depart from routine methods. Changing beliefs and adjusting behaviors are requisites for radical innovations, which are impeded by rigid frames and constrained mind-sets that resist novel ideas and techniques (Cassillas et al., 2010; Starbuck, 1996). A third implication for marketing managers is to be cognizant of and accommodate external and internal conditions affecting capabilities for sustainable innovation. Publicly held firms face the challenges of greater scrutiny from various stakeholders due to their higher visibility compared to private companies. At the same time, public ownership enables a firm to be more effective in creating and introducing sustainable innovations by strengthening its capability of market-based sustainability, possibly through a higher consciousness that actions serving one stakeholder group also needs to serve others. Therefore, managers in firms under public scrutiny can expect this condition to propel sustainable innovation endeavors. With respect to the internal condition of unlearning, firms need to carefully manage the discarding of no longer relevant information with the acquisition of new knowledge. Discussions among 15 innovation parties about which learning and practices remains useful or is to be temporarily put aside are necessary. A final matter is whether firms should pursue sustainable innovation in the first place, given doubts about the merits, especially financial, of such efforts. Based on our findings of triple bottom-line rewards, the fourth implication is that managers should advocate for and execute these projects, but with proper expectations. Although marketing managers should anticipate greater sustainable innovation to improve firm revenues and profitability, the more immediate improvements appear in environmental and social performance, followed thereafter by economic performance. Put another way, a more expansive view is required to recognize that financial gains do come but as a consequence of environmental and social successes. Several issues are deserving of future investigation. One is how strategic alignment is triggered and performed by firms in the face of opposing demands from stakeholders. External shocks, such as an unexpected new environmental regulation or a competitor’s successful socially conscious product, may shake firms out of a stupor to pursue sustainable innovation. Possible catalysts deserving of examination include the velocity of industrial or economic restructuring, organizational (re) interpretation of customer value, and resource use substitution (Chen et al., 2015; Glavas & Mish, 2015; Varadarajan, 2015). Furthermore, while utilizing market-based sustainability, the issue of which stakeholders to attend to, as well as when and how, are unclear (Delong & Mehalik, 2013). If shareholders do not see that sustainability leads to profitability, but customers intrinsically value goods and services with social wellbeing and climate- or resource-preserving features, which choice shall a firm make? The specific calculus for sustainable innovation can to be determined in future research. Another line of study is the relationship among the components of the triple bottom-line. While our research shows that economic performance results from social and environmental, do these relationships vary by type of innovation and other firm or industry characteristics not examined here? For instance is it possible that when the sustainable innovation is more technology-intensive, requiring greater financial investment than in other cases, would financial returns be delayed and even weakened? Technology firms may be better able to make such investments and weather the duration needed for the market to evolve and appreciate the benefits of the sustainable innovation. Our study is limited in examination of a selected factors in and results of sustainable innovation. We 16 K. WEIDNER ET AL. acknowledge that there is still a substantial amount of variance of the triple-bottom-line performances not explained by our model. Future research can investigate other factors as possible antecedents, contingencies and consequences of sustainable innovation as well as further probe the intricacies of the triple bottom-line. For instance, the market for an SBU, consumer or industrial, may influence sustainable innovation. Extensions of our work can also apply other methods such as ethnography to understand further how firms manage perceived trade-offs among competing interests in sustainable innovation projects, as well as longitudinal data to assess the dynamics of sustainable innovation efforts over time. Nonetheless, our study underscores the value of sustainable innovations as companies increase their concomitant commitments to people, planet, and profits. In accordance with Taylor & Francis policy and our ethical obligation as researchers, we report that we have no potential conflict of interest ORCID Cheryl Nakata http://orcid.org/0000-0003-0241-7400 References Aboelmaged, M., & Hashem, G. (2019). 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Measurements and item loadings Construct Sustainable Innovation (SI; α =.95; CR =.96) Measurement Items To what extent do you agree or disagree with the following statements: Over the past two years, our SBU has done a good job . . . 1. generating sustainable innovation processes. 2. designing sustainable innovation processes. 3. implementing sustainable innovation processes. 4. generating sustainable innovation products and services. 5. designing sustainable innovation products and services. 6. implementing sustainable innovation products and services. Market Based Sustainability (MBS; α =.89; In our SBU, we consider and balance what our customers need with the . . . CR =.91) 1. environmental concerns of other stakeholders (such as shareholders, governments, the public). 2. social concerns of other stakeholders. 3. economic concerns of other stakeholders. In our SBU, we strive to meet the needs of our customers while considering the . . . 4. environmental needs of other stakeholders (such as shareholders, governments, the public). 5. social needs of other stakeholders. 6. economic needs of other stakeholders. Public Ownership (PUB) Is your company publicly traded? (1 = Yes, 0 = No) Organizational Learning (OL; α =.76; 1. In our SBU we attend all sorts of expert presentations to improve our knowledge of sustainability. CR =.87) 2. In our SBU we exchange newly acquired information with one another to improve our knowledge of sustainability. 3. In our SBU we share newly acquired information about sustainability with top managers. Organizational Unlearning (OU; α =.91; 1. In our SBU, we assess our knowledge and routines to determine if they are relevant. CR =.92) 2. In our SBU, we evaluate our knowledge and routines to see if they are useful. 3. In our SBU, we discard existing knowledge and routines that do not apply. 4. In our SBU, we are willing to set aside old ways of doing things. 5. Individuals in our SBU are willing to set aside the old way of doing business to adapt. 6. Individuals in our SBU evaluate knowledge and routines to see if they are useful. 7. Individuals in our SBU discard existing knowledge and routines that do not apply Environmental Performance (ENVPERF; Our SBU’s past two year environmental performance relative to closest competitors, in α =.88; CR =.93) 1. providing products or services that have a less environmentally harmful impact than in previous years. 2. providing products or services with less environmentally damaging inputs than in previous years. 3. reducing or eliminating environmentally harmful processes. Social Performance (SOCPERF; α =.92; Our SBU’s past two year social performance relative to closest competitors, in . . . CR =.94) 1. employee well-being, health, and safety. 2. community well-being, health, and safety. 3. the well-being of disenfranchised, or less fortunate, members of the community. 4. access to resources and opportunities for all members of the community. Economic Performance (ECONPERF; Our SBU’s past two year financial performance relative to your closest competitors, in α =.91; CR =.94) 1. return on investment 2. profitability 3. market share 4. sales Item Loading .94 .91 .90 .77 .73 .74 .63 .81 .54 .71 .95 .56 – .59 .87 .89 .61 .68 .61 .82 .88 .82 .73 .94 .95 .82 .51 .63 .89 .97 .86 .97 .68 .72 α = Cronbach’s Alpha, CR = Composite Reliability. Item Loading reports Completely Standardized Solution from a covariance-based SEM full-model CFA test by LISREL. The CFA model does not include interaction terms.