Advanced Environmental Management and Innovation : A Theoretical Framework

Environmental impact, a consequence of ever-increasing industrial activities around the globe, is a growing problem in the world. Firms actively engaging in green innovation can not only minimize production waste but also increase their corporate reputation and legitimacy while satisfying stakeholders’ demands. In this chapter, we provide a theoretical review of the impact that environmental innovation has on firms’ ability to sustain a competitive advantage. We summarize the environmental management literature’s most important findings relating to firms’ innovation capabilities over the last several decades. In addition, we consider the strategic potential of environmental innovation, explaining how it constitutes a potential source of competitive advantage. Next, we point out a set of important determinants of environmental innovation, focusing on environmental regulations and then analyzing several firm-specific features that may also determine the effectiveness of environmental innovations (a firm’s strategic orientation, competencies and network relations). Finally, we summarize our conclusions, propose future lines of research and provide managers and policy-makers with evidence of the increasing importance of firms’ environmental innovation capabilities for protecting the natural environment