Sustainable Innovation Initiatives by Small and Medium Enterprises: A Systematic Literature Review
Sustainable Innovation Initiatives by Small and Medium Enterprises: A Systematic Literature Review
Sustainable Innovation Initiatives by Small and Medium Enterprises: A Systematic Literature Review
Meeta Dasgupta
To cite this article: Meeta Dasgupta (2021): Sustainable innovation initiatives by small and
medium enterprises: a systematic literature review, Journal of Small Business & Entrepreneurship,
DOI: 10.1080/08276331.2021.1898177
Article views: 70
RÉSUMÉ
L’ampleur des de fis environnementaux et sociaux auxquels le
monde est confronte aujourd’hui exige des entreprises, grandes
et petites, qu’elles developpent des solutions innovantes et dura-
bles qui soient economiquement, ecologiquement et socialement
viables. L’objectif de cet article est d’examiner les initiatives inno-
vantes et durables prises par les petites et moyennes entreprises
(PME) et les petits entrepreneurs, ainsi que leur impact sur les
performances. L’article presente une revue systematique de
litterature dans ce domaine. Tirees de bases de donnees universi-
taires, 63 publications sur les initiatives innovantes et durables pri-
ses par les PME ont ete identifiees et analysees. Les resultats
revelent que la majorite des initiatives prises par les PME sont
liees aux innovations de produits et de proced es, et que l’accent
a ete mis sur les PME du secteur manufacturier. La revue tente
une analyse de la cha^ıne de valeur qui met l’accent sur l’impor-
tance accordee aux activites operationnelles et manufacturieres
Introduction
Nowadays there is an increasing political and social awareness of the importance of
the development of sustainable innovations, with the European Commission launch-
ing the Eco-Innovation Action Plan (EcoAP) in December 2011 (Dıaz-Garcıa,
Gonzalez-Moreno, and Saez-Martınez 2015). The Triple Bottom Line (TBL) concept
has become quite popular both amongst the academicians and practitioners.
However, along with this comes the need to measure the impact of the sustainable
initiatives. Although economic and political drivers at the national and international
level are pivotal for setting the sustainability framework, the key role of individuals
and various stakeholders cannot be ignored in bringing about a change in commun-
ities towards sustainability (Artin and Artin 2019; Cagliano, Worley, and
Caniato 2016).
Emphasis on sustainable business practices has been increasing over the years,
especially amongst the small and medium business managers, executives and practi-
tioners (The Good Company 2005). Small and medium enterprises (SMEs) are recog-
nized universally as the backbone of any economy and the powerhouse of growth,
with a high proportion of enterprises around the world classified as small and
medium enterprises (Anand 2015). Also they are recognized as the seedbed of invent-
iveness, creativity and innovation (as cited in Oxborrow and Brindley (2013)). The
definition of SMEs varies across geographies; the criteria used for their classification
being number of employees or the investment made by the enterprises in plant and
machinery or equipment. Researchers, therefore, have an opportunity to study a field
that has the potential to impact business processes and decisions. However, what is
lacking is an understanding of the various sustainable innovation initiatives taken by
SMEs and their impact on performance.
The systematic literature review (SLR) process outlined by Transfield, Denyer, and
Smart (2003) has been employed to synthesize and assess the existing literature on
sustainable innovation in SMEs. The purpose was to explore the various sustainable
innovation initiatives taken by SMEs and the impact on performance. Mentioned
below are the questions that guided the study:
The sections of the paper are organized as follows. Firstly, how the study defines
sustainable innovation has been given. Next a detail on the methodology adopted for
identification of the papers for the literature review is presented. This is followed by
a synthesis of the analysis of the identified papers by presenting the various sustain-
able initiatives taken by the SMEs, the metrics used to measure the impact on per-
formance, a value chain analysis of the activities modified to support the initiatives,
the evident broad themes around which the research can be presented, and a concep-
tual model proposed. The paper ends with highlighting the research gaps evident
through the SLR and directions for future research.
Methodology
The purpose of this research is to identify, evaluate and synthesize the existing litera-
ture on sustainable innovation initiatives by SMEs. Reviewing the literature in the
area has helped to identify the common research methodologies used by researchers,
4 M. DASGUPTA
the spread of research in the field geographically and industry-wise, the types of
research in focus, that is product, process, services etc. and the interventions dis-
cussed in various value chain activities. Additionally, the study has helped to identify
different performance parameters used to measure the outcome of various sustainabil-
ity initiatives, the themes/trends in the area and the research gaps.
The procedure outlined by Transfield, Denyer, and Smart (2003) was used to con-
duct the SLR. The process consisted of three stages: planning for the SLR, execution
and reporting. Defining the objectives of the research and detailing the different steps
followed in identifying the relevant literature for the study was the first step. The risk
of error and potential bias for data collection was reduced by clearly defining the
search strategy and the inclusion and exclusion criteria.
Collecting and organizing the data was part of the second stage. Predefined search
words and search criteria regarding the publication year of the paper, the language,
and the nature of paper were used. In order to make the process replicable a system-
atic approach was followed. Firstly, academic search boundary was set to the use of
electronic journal databases as it is believed that these databases have considerably
improved the accessibility and dissemination of journal articles. Secondly, as the pur-
pose was not to limit the literature search to specific category of journals say, those
appearing in ABS or ABDC or any other, an extended search using the keywords
identified was conducted using the electronic databases Business Source Complete,
ABI/Inform (Proquest) and Emerald Insight to reach a saturation with respect to new
papers getting picked up by the search. The search was limited to peer-reviewed aca-
demic articles written in English language. The period selected for the study was
restricted to the years 2000 to 2019. Search words “Sustainable innovation and
SMEs,” “green innovation and SMEs,” and “environmental innovation and SMEs”
were used to identify the papers. The initial search resulted in 6631 papers. After
applying the exclusion criteria as detailed in the methodology (Figure 1), a total of 67
papers were shortlisted. An additional 5 papers were identified by going through the
references of the selected papers. Of the 72 papers, 63 empirical papers qualified for
the in-depth analysis. The research questions guided the selection of papers for in-
depth analysis:
Papers that did not meet all the inclusion criteria, that is, did not have a SME as
the unit of analysis and did not discuss a sustainable innovation initiative taken by a
SME and did not explore value chain activities modified to support the initiative
leading to improved performance were not subject to the analysis. As the nine con-
ceptual papers did not qualify the above mentioned criteria, they too were not subject
JOURNAL OF SMALL BUSINESS & ENTREPRENEURSHIP 5
The time period of the search was divided into two 2000–2010 and 2011–2019. The
data reveals that the last decade has seen a huge jump in the interest in the
research area.
As is evident from Figure 2, Canada and South America rank the lowest with
respect to publications in the area (1 publication each). Both Asia and Europe have
significantly more papers published (19 and 17 respectively).
Industry focus
As is evident from Figure 4 majority of the research (around 65 percent) has focused
on exploring the sustainable innovation initiatives taken by the SMEs in the manufac-
turing sector. Focus on studying initiatives taken by SMEs in the services sector is
relatively low (around 11 percent). Around 16 percent of the papers involve a cross-
sector study.
Pillars of sustainability
Although sustainability encompasses an impact on all the three pillars of environmen-
tal, social and economic, the data analysis shows that around 51 percent of the papers
JOURNAL OF SMALL BUSINESS & ENTREPRENEURSHIP 7
have explored the innovation initiatives that have an impact on the environment and
the financials of the SME. Only 40 percent of the papers exhibit initiatives that have
an impact on all the three pillars of sustainability. The SLR resonates the findings of
Mupfasoni, Kessler, and Lans (2018), that in organizations awareness of environmen-
tal sustainability is better developed than their social and economic sustainability
(Figure 5).
Types of innovation
The data analysis (Table 1) shows that majority of the sustainable innovation initia-
tives taken by the SMEs are with respect to products and processes. Firms have also
innovated with respect to the services given to customers, organizational practices,
their business models, and use of technology.
8 M. DASGUPTA
With respect to innovation in products, SMEs have made investment in the pro-
duction of green products using raw materials and components that are non-toxic
and biodegradable and have lesser impact on the environment, have designed prod-
ucts requiring lesser or recycled raw materials, that leave lesser residual waste prod-
ucts and that can be easily recycled, conceptualized products that consume lesser
energy during the development process, and have devised ways of reducing the size
and weight of product packaging.
Sustainable process innovations in SMEs get exhibited in the form of production
processes that are eco-friendly and consume less raw material, reduce waste and
emissions, are energy efficient, consume less water, coal or oil, have lesser environ-
mental risks because of accidents, spills and releases, and have increased safety. They
may involve change in procedures or replacement of inefficient equipment.
Very few papers, 4 in number, have discussed sustainable innovation initiatives taken
in services. Most of the new services introduced have been discussed from the point of
view of the benefits created for the society in the form of providing education/awareness
for protection of the environment or providing consulting in the form of waste manage-
ment. 12 papers have talked about initiatives taken by SMEs to modify their organiza-
tional practices. Modifications have happened with respect to new programs introduced
for reducing energy consumption, a new cost accounting system being introduced, new
marketing or HR practices being introduced to promote adoption of green manage-
ment. SMEs have made investment in cleaner technology or in robots to increase the
efficiency in manufacturing. There is only one paper that explores the business model
of the SME. The business model of the SME built on strategic partnerships helps the
firm achieve economic, environmental and social viability.
Table 1. Continued.
Product Infra
Product/ Org. Business Inbound Outbound Marketing After-sales and and
Title of the paper packaging Process Service practices Technology model logistics Operations logistics and sales support Procurement tech dev HRM planning
Ecopreneurship—a new approach to managing the triple 冑 冑 冑
bottom line
Ecopreneurship and green innovation for the success of new 冑 冑 冑 冑 冑
spa products
M. DASGUPTA
冑 冑 冑 冑 冑
in SMEs
Environmental management in SMEs in the UK: practices, pressures 冑 冑 冑 冑 冑 冑 冑
and perceived benefits UK: practices, pressures and
11
perceived benefits
35 55 4 12 3 1 19 56 13 16 7 25 56 15 14
12 M. DASGUPTA
The data analysis (Table 1) exhibits the activities across the value chain that have
been modified to support the sustainable innovation initiatives. As is evident opera-
tions have been modified in most of the SMEs. Operations have been modified with
respect to the manufacturing processes or change in the packaging activities or by
ensuring greater control over the quality of products manufactured so that they meet
the benchmarks set for environmental control. The product and technology develop-
ment activities have also played an active role with respect to support in design/
redesign of the products and processes and in conducting research and development
activities to support the various initiatives.
Relatively fewer papers have exhibited the change in other value chain activities.
For instance, 19 papers have discussed the change in inbound logistics to support the
sustainable innovation initiatives of the SMEs. Change in inbound logistics has been
discussed with respect to greater quality control on raw materials received with strin-
gent supplier compliance audits being conducted. On the other hand, just 13 papers
have discussed the interventions made in outbound logistics to support the initiatives.
Outbound logistics has been primarily discussed with respect to use of green trans-
portation that reduces fuel consumption and reduces pollution, use of reusable con-
tainers in logistics, and packaging of the finished goods that reduces the size and
weight of the packaging. Papers have also discussed efforts made by SMEs for reverse
logistics in order to retrieve used products from customers to ensure their proper dis-
posal. 16 papers have discussed the interventions made in marketing and sales,
whereas 7 papers have discussed interventions in after-sales support to support the
initiatives. These get exhibited in the form of establishing relationships with custom-
ers and educating them to promote recycling of products, incorporating environmen-
tal messages in packaging and promotions, and competitive pricing of green
products. 25 papers have discussed changes in procurement activities. These are pri-
marily with respect to management of suppliers to ensure they meet the environmen-
tal compliance requirements, conducting audit of their internal processes, conducting
training and education programmes for the suppliers, undertaking collaborative
research for cleaner processes, for substituting raw materials or for removing hazard-
ous materials from the production process. Around 15 papers have discussed the role
played by human resource management in the various initiatives. The role is with
respect to conducting training of employees to build their competencies in environ-
mental protection and green issues, running employee awareness campaigns, intro-
ducing rewards and incentives for green initiatives, and linking employee promotions
to adoption of green management. Around 14 papers have discussed the role of infra-
structure and environmental planning to support the initiatives. The role is with
respect to encouraging collaboration across departments, introduction of various
practices within the firms, undertaking construction that promotes sustainability, and
facilitating a green IT or logistics infrastructure.
Table 3. Continued.
Themes Description
Relational efficiency (Lee, Kim, and Choi 2012)
Organization citizenship behavior/Organization culture (Lee, Kim, and Choi
2012; Lynn, McNeill, and Warren-Smith 2013; Paille et al. 2014; Chang 2015)
Knowledge management system to harness knowledge residing in networks
(Roxas and Chadee 2016)
Lean management practices (Sajan et al. 2017)
Availability of resources (Mafini and Muposhi 2017)
Partnerships/collaborations Public-private partnerships (Hansen and Klewitz 2012)
To build green innovation knowledge base (Gema et al. 2018)
Buyer-supplier relationships (Lee and Klassen 2008; Gregory and Hofmann
2015; Ekawati et al. 2017; Mafini and Loury-Okoumba 2018)
With universities and research agencies (Triguero, Moreno-Mondejar, and
Davia 2015)
With community and social partners (Dixon and Clifford 2007; Paille et al.
2014; Gema et al. 2018)
With upstream and downstream partners (de Bruijn and Hofman 2000;
Kumar 2015; Mafini and Muposhi 2017)
Presence of networks (Klewitz, Zeyen, and Hansen 2012)
Enablers
Public support and funding encourages sustainable innovation in companies. In fact,
public funding stimulates private funding for sustainable innovation initiatives, which
further improves a company’s financial performance (Brankov, Ivaskovic, and Cater
2012). Government support in the form of subsidies and rebates for improved envir-
onmental performance can be helpful during the establishment period of the technical
innovation (Hardie, Allen, and Newell 2013a, 2013b). Empowering SMEs can improve
the creative potential of SMEs in producing environment friendly products and can
also play an important role in improving the social capital (Muafi 2015).
A firm’s ecological strategic orientation and its value systems influence the choices
the decisions makers make with respect to adoption of sustainable practices. These
choices also determine the resources the firm is willing to commit for the sustainable
innovation initiatives. Limited resources and capabilities available within many SMEs
hinder an effective response to pressures from the external environment (Ciasullo
and Troisi 2013; Chin-Chun, Tan, and Suhaiza 2016).
18 M. DASGUPTA
Size of the organization impacts capabilities with respect to time and the number
of staff available for taking various sustainability initiatives (Oxborrow and Brindley
2013). Large firms are not only in a position to get easy access to financial resources,
they are also in a position to spread the fixed costs of R&D over a larger sales volume
and get economies of scale and scope (as cited in Triguero, Moreno-Mondejar, and
Davia (2015)).
In fact, adoption of activity based accounting helps organizations to calculate cost
more accurately, review the set of activities and eliminate waste, thus enhancing the
competitiveness of the firm (Yang and Chang 2018). Implementation of green human
resource practices involving training and development of employees and initiating
rewards and incentives for green initiatives go a long way in building a culture that
promotes sustainability and helps organizations in attaining long term goals (Cheema
et al. 2015). Roxas and Chadee (2016) have brought out the importance of developing
an organizational capability to engage in knowledge management to adopt sustainable
business practices.
researchers empirically investigate the innovation initiatives taken by SMEs that have
an impact not only on environmental sustainability but also on economic and social
sustainability.
Focus on the process of sustainable innovation and not only the outcome
The outcome of the sustainable innovation initiatives has been the focus of most of
the research. Exploring the process of innovation so as to ensure that in addition to
the outcome the process also meets sustainability benchmarks can be an interesting
area of study.
Conclusion
Sustainable innovations can improve the competitiveness of firms. A focus on the
three pillars of sustainability will help SMEs to bring together both monetary and
non-monetary values. It will help them to devise solutions that do not trade-off the
interests of one set of stakeholders to benefit the other. By bringing together the
thoughts and expectations of the different stakeholders attached to the three pillars,
SMEs can speed up the innovation process.
In the past decade there has been an increased focus by companies with respect to
investing in various initiatives that contribute to the environment, society and to their
profitability. Likewise, there has been an increased interest amongst researchers to
explore and document the various sustainable initiatives taken by organizations.
Although the scope of the current paper was limited to SMEs, these points become
very evident from the analysis of research done in the domain.
The paper has highlighted some of the broad themes around which research has
been done in the area. Additionally, the paper has highlighted some of the prominent
innovation initiatives that have been taken by SMEs in order to meet their environ-
mental, economic and social objectives. A value chain analysis of the various activities
complementing the sustainable innovation initiatives is an attempt by the paper that
is different from other SLRs. The paper has also highlighted the various control meas-
ures that can be used by SMEs for measuring the performance of their sustainable
innovation initiatives.
Finally, the systematic literature review has highlighted some research gaps. The
author hopes that the arguments presented in this paper and the research gaps high-
lighted will providing interesting ideas to researchers and academicians to take for-
ward in the future years.
Disclosure statement
No potential conflict of interest was reported by the author(s).
Notes on contributor
Dr. Meeta Dasgupta is an assistant professor in the area of Strategic Management. Her
research interests are in the areas of innovation management and strategies, strategic alliances
and joint ventures, corporate/business strategy and competitiveness of firms.
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