Abstract
This study attempts to investigate the relationship between sustainability innovation, firm performance, financial stability, and competitive advantage. In order to do so, the authors explore the effects that the implementation of a new business process which targets sustainability has on three small and medium sized businesses (SMEs) operating in Italy. Within the methodology section the authors have discussed the various criteria utilized to select an appropriate and adequate sample of SMEs. Semi-structured interviews were utilized to gather qualitative data so as to reflect the lived experiences of various members of SMEs' personnel. Data, charts, and various reports were utilized. The findings suggest the presence of a positive relationship between sustainability innovation and firm performance. Furthermore, the authors have gathered and analyzed evidence which supports the hypothesis that sustainability innovation has a positive correlation when it comes to financial stability.
TopIntroduction
The growth of the global population and the continuous development of the economy is causing increased consumption of resources. Therefore, the materials utilized to support the production of assets increase the emissions produced while also causing a burden to the environment. Due to the aspects above, entities, institutions, and, more broadly, stakeholders are pressuring firms to respond to these challenges and deal with environmental degradation (El-Kassar et al., 2019). Businesses are increasingly under pressure from different stakeholders to be more sustainable while maintaining a high degree of competitiveness due to the new challenges highlighted by globalization and technological advancements (Ikram et al., 2021). However, external pressure motivates organizations and firms globally to innovate their business to reduce their environmental impact (Le and Ikram, 2022). Part of the literature supporting the revisionist approach to sustainability innovation believes that it can aid and support businesses in improving their competitive advantages (Zefeng et al., 2018). However, previous studies that have examined the effects of sustainability innovation on firm performance and competitiveness usually target and focus on a single relationship and rarely investigate multiple effects within a single search model (Le and Ikram, 2022; Gurlek and Tuna, 2018).
Moreover, most studies concerning the impact of sustainability innovation examine and focus on data produced by the companies within a short and set period (Ikram et al., 2019; Maletič et al., 2021). Therefore, studies which utilize more qualitative data and investigate the lived experiences of key personnel within firms are necessary (Thanh et al., 2021). Qualitative data obtained from individuals directly correlated to a firm's development and innovation permit the gathering of longitudinal data to critically observe the real effects of sustainability innovation on firms’ performance (Doluca et al., 2018; Ikram et al., 2021). Therefore, the lived experiences of employees and entrepreneurs who have worked within the same context enable the collection and analysis of data which grants the assessment of the real impact of sustainable innovation (Kusi-Sarpong et al., 2019). The elements mentioned above highlight the existence of a gap in the literature that can be further researched and developed. This study analyzes small and medium-sized enterprises (SMEs) that have introduced a new business process that focuses on improving the firm’s environmental performance. The selected SMEs operate in Italy.
Moreover, the sample under study operates within the farming and agricultural sector. Three SMEs agreed to participate in the study. Thus, the gathered data reflect the experiences of said three firms. To gather the necessary data, the authors have adopted a qualitative approach. Semi-structured interviews were conducted with the key personnel of the various firms to gather the necessary data.
Moreover, the firms allowed the researchers to analyze reports, charts, and various other forms of documents produced over numerous periods. The authors also utilized their personal observations on the effects and effectiveness of sustainability innovation. By doing so, the researchers could triangulate data to strengthen the validity of the proposed findings (Yin, 2018). A set of research questions are developed using multiple theoretical approaches that combine stakeholder theory, sustainability vision theory, resourced-based innovation theory, and integrated innovation theory.
Thus, this study addresses the previously reported gap by answering the following research questions:
Key Terms in this Chapter
Profit Centre: Part of an organization that directly adds to the entire organization’s bottom line by generating revenues and earnings.
Environmental Impact: Any change caused to the environment due to human activities
Sustainable Management: Business processes whose aim is to avoid the deterioration of natural resources and environment in which the company operates.
Sustainability Innovation: Is the making of intentional changes to a company’s processes, products, or services to generate long term environmental and social benefits while also generating revenues for the firm.
Environmental Performance: Are indicators whose aim is to report the natural resource utilization, waste and emission of businesses and firms’ processes.
Small and Medium Enterprises: Companies with fewer than 250 employees and an annual turnover not exceeding 50 million euro.
Sustainability: Meeting the needs of businesses and society without compromising the ability of future generations to meet their own needs.
Cost Centre: Part of an organization whose costs are charged for accounting purposes.