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Journal of Cleaner Production xxx (2013) 1e19

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Journal of Cleaner Production

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Review

Sustainability-oriented innovation of SMEs: a systematic review

Johanna Klewitz*, Erik G. HansenLeuphana University Lüneburg, Scharnhorststraße 1, D-21335 Lüneburg, Germany

a r t i c l e i n f o

Article history:Received 11 September 2012Received in revised form22 April 2013Accepted 11 July 2013Available online xxx

Keywords:Sustainability-oriented innovationEco-innovationSMEsSystematic reviewSustainability strategySustainable entrepreneurship

* Corresponding author. Tel.: þ49 4131 677 2249; fE-mail addresses: [email protected]

uni.leuphana.de (E.G. Hansen).

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a b s t r a c t

Since the Brundtland report in 1987 a wide debate has emerged on eco-innovation (e.g. eco-design,cleaner production) and sustainability-oriented innovations (SOIs), that is, the integration of ecologicaland social aspects into products, processes, and organizational structures. While prior research has oftendealt with SOIs in large firms, the last decade has begun to generate broad knowledge on the specificitiesof SOIs in small and medium sized enterprises (SMEs) as they are increasingly recognized as centralcontributors to sustainable development. However, this knowledge is scattered across different disci-plines, research communities, and journals. Therefore, this paper analyzes the heterogeneous pictureresearch has drawn within the past 20 years with a focus on the innovation practices including differenttypes of SOIs and strategic sustainability behaviors of SMEs through an interdisciplinary, systematic re-view in a time frame between 1987 and 2010. By consulting major research databases we have analyzed84 key journal articles bibliographically and thematically. We find that first SME strategic sustainabilitybehavior ranges from resistant, reactive, anticipatory, and innovation-based to sustainability-rooted.Second, we identify innovation practices at the product, process, and organizational level. Third, ourresults show that research is still strong on eco-innovation rather than on innovation from a triplebottom line perspective (economic, social, and environmental dimension), that is, SOIs of SMEs. Our maintheoretical contribution is the development of an integrated framework on SOIs of SMEs where wedelineate how distinct strategic sustainability behaviors can explain contingencies in types of innovationpractices. Furthermore, for the more proactive SME behaviors we argue that they possess higher capa-bilities for more radical SOIs with the innovation process itself changing. Therefore, we propose thatinteraction with external actors (e.g. customers, authorities, research institutes) can ultimately increasethe innovative capacity of SMEs for SOIs. Finally, we identify major research gaps with regard to radicalSOIs, streamlined innovation methods, the role of SMEs in industry transformation and in sustainablesupply chains, as well as a need for a stronger theoretical debate on SOIs of SMEs.

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1. Introduction

How do firms successfully compete in changing markets andenvironments while contributing to sustainable development? Oneincreasingly important way for firms to do so are theirsustainability-driven innovation practices (Paramanathan et al.,2004; Roome, 1994; Schaltegger, 2011; Sharma, 2002). While theterm sustainable development was first coined at the United Na-tions Conference on the Human Environment in 1972 (Hall et al.,2010), the opportunities to innovate for sustainability receivedwide attentionwith the Brundtland report in 1987. It pointed to theimportance of firms to create, redesign, adapt, and diffuse envi-ronmentally sound technologies (WCED, 1987: 70). Increasingly,

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environmental issues were recognized as sources of strategicchange (Aragón-Correa et al., 2008), ecological factors became partof innovation research (Noci and Verganti, 1999; Roome andHinnells, 1993; see also Schiederig et al., 2012), and eco-innovation practices such as cleaner production, life cycle assess-ments, and eco-design found their way into firms (Huber, 2008;van Hemel and Cramer, 2002). From this initially eco-innovationdriven debate evolved a stream of research on sustainability-oriented innovations (SOIs) with a broader focus on environ-mental, social and, economic dimensions (e.g. Fichter and Paech,2004; Hall, 2002; Paech, 2007; Schaltegger and Wagner, 2011;van Kleef and Roome, 2007; Wüstenhagen et al., 2008). SOI inour understanding describes a ‘direction’, which to follow requiresthe deliberate management of economic, social, and ecological as-pects (Hansen et al., 2009; Paech, 2007) so that they become in-tegrated into the design of new products, processes, andorganizational structures (Rennings, 2000).

oriented innovation of SMEs: a systematic review, Journal of Cleaner

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J. Klewitz, E.G. Hansen / Journal of Cleaner Production xxx (2013) 1e192

While both large and small companies can engage in SOIs,small and medium sized enterprises (SMEs) will innovate differ-ently (e.g. Bos-Brouwers, 2010; Hansen and Klewitz, 2012a,b). Toconduct more systematic research in the area of SMEs is importantbecause they build a large group internationally (ECEI, 2010;OECD, 2002), contribute as a group to a large share of overallpollution (cf. ECEI, 2010; Hillary, 2000), and are attributed withinnovation propensity for sustainability (Aragón-Correa et al.,2008; Bos-Brouwers, 2010).

However, research on SOIs of SMEs is strongly scattered acrossdifferent disciplines and research communities (e.g. innovationmanagement; sustainable entrepreneurship; cleaner production;sustainability management) as well as journals (e.g. sustainabilityvs. mainstream journals). Therefore, we do not have a clear pic-ture because little prior research aimed at aggregating thisknowledge systematically. While some earlier literature reviewscover a large number of studies (e.g. Del Brío and Junquera, 2003),only a few more recent reviews use the methodology of the sys-tematic review (Tranfield et al., 2003), which aggregates knowl-edge by using clearly defined processes and criteria. Prior reviewsthat have focused on barriers and drivers (Walker et al., 2008) andon policy interventions to facilitate eco-innovation in SMEs (Parkeret al., 2009) provide a clear picture of the antecedents of SOIs ofSMEs, but the SOI practices at the product, process, and organi-zational level are not dealt with in detail. Therefore, we willanalyze the innovation practices of SMEs with a focus on differenttypes and strategic sustainability behaviors. Furthermore, we willshow the primarily used analytical and methodological ap-proaches, highlight well explored SOI topics, and propose issuesfor future research. Accordingly, the main research question is:which practices of sustainability-oriented product, process, andorganizational innovations occur of SMEs and how do theyinteract?

To achieve this goal we have employed the method of aninterdisciplinary, systematic review of 84 key journal articles in atime frame between 1987 and 2010.We find that first SME strategicsustainability behavior ranges from resistant, reactive, anticipatory,and innovation-based to ‘sustainability-rooted’. Second, we iden-tify innovation practices at the product, process, and organizationallevel. Third, research is still strong on eco-innovation rather than oninnovation from a triple bottom line perspective (economic, social,and environmental dimension). Based on our results we develop anintegrated framework on SOIs of SMEs where we delineate howdistinct strategic sustainability behaviors can explain contingenciesin types of innovation practices.

To the knowledge of the authors, no systematic review existsfocusing on innovation practices of SMEs to date. Also, we think thatthis is the first systematic approach of joining previously separateliteratures on environmental or sustainability management inSMEs and eco- or sustainable entrepreneurship.

The remainder of this article is structured as follows: sectiontwo explains our understanding of SOIs in the context of SMEs andthus serves as a basis for the systematic review in the sense of apositive inclusion list. Relevant prior systematic reviews are alsopresented. Section three presents the employed method. We showthe results of the systematic review in section four and five, wherewe address the research question. Section six discusses the results.Suggestions for future research are also provided and the limita-tions of the study are shown in our conclusion.

2. Background and terminology

To deduce relevant key words for the systematic review, it isnecessary to first specify the terminology which here results fromthe intersection of sustainability, innovation, and SMEs.

Please cite this article in press as: Klewitz, J., Hansen, E.G., Sustainability-Production (2013), http://dx.doi.org/10.1016/j.jclepro.2013.07.017

2.1. Sustainability and innovation

The concept of sustainable development is defined as “devel-opment that meets the needs of the present without compromisingthe ability of future generations to meet their own needs” (WCED,1987: 54). Based on this political concept, the organizational-levelconcept of corporate sustainability can be understood as system-atic management efforts by corporations to balance environmentaland social with economic goals in order to minimize harm to andincrease benefits for natural environments and societies (e.g. Dyllickand Hockerts, 2002). Thoughwe refer to sustainability in this paper,we also allow for narrower approaches dealing with a selectedsustainability dimension, particularly ecology, as companies oftenfocus on or start with improvements in either environmental orsocial dimensions in their journey toward sustainability.

To contribute to sustainability, innovation is an importantmeans (Hansen et al., 2009; Schaltegger and Wagner, 2011). Inno-vation, in general, is the implementation of a new or significantlyimproved product (e.g. change in product properties), process (e.g.changed delivery methods), marketing method (e.g. new productpackaging) or organizational method (e.g. changes in workplaceorganization) in business practices, workplace organization, orexternal relations (OECD, 2005: 17, 46). It should be emphasizedthat innovations need to be successfully diffused in the market (e.g.products) or implemented (e.g. processes) to achieve an economicimpact, that is, go beyond inventions (OECD, 2005: 17). An inno-vation has to have a significant degree of novelty for the firm (be itself-developed or adopted) and can also be new to the market orworld (OECD, 2005: 58). The latter understanding of innovationand sustainability allows us to better define SOIs which areexplained in detail next.

2.2. Sustainability-oriented innovations

The debate on companies directing their business activities to-ward sustainability through innovation was initially focused oneco-innovations. For instance, environmental issues were recog-nized as sources of strategic change (Aragón-Correa et al., 2008)and drivers for innovation strategies (Noci and Verganti, 1999). Eco-innovations represent new or enhanced processes, organizationalforms, as well as products or technologies that are beneficial to theenvironment in that they reduce or avoid negative environmentalimpacts (Beise and Rennings, 2005; OECD, 2005; Rennings, 2000).Each of these three general types is further elaborated with regardto the environmental dimension:

� Process innovations relate to the production of goods and ser-vices, often with the aim of increasing eco-efficiency or meta-bolic consistency (sometimes referred to as eco-effectiveness;Huber, 2008). They are further differentiated into end-of-pipesolutions and cleaner production technologies (Renningset al., 2006). SMEs engaging in cleaner production, forexample, can alter their way of using resources, manage non-product outputs through schemes of closed loop productionor industrial symbiosis, and improve the overall eco-efficiencyof business operations (Altham, 2007).

� Organizational innovations entail the reorganization of routinesand structures within the firm and new forms of management,which all usually “deal primarily with people and the organi-zation of work” (OECD, 2005: 55). This also includes moreformalized management systems such as environmentalmanagement systems (Rennings et al., 2006).

� Product innovations are improvements or entirely new de-velopments of products and services. For instance, eco-designmay improve products through more eco-benign materials


1 A further stream of literature in this line is on social entrepreneurship whichwas excluded from this analysis because it deals with organizations operatingprimarily not-for-profit (e.g. Zahra et al., 2009) with the foremost aim to solvesocial needs (Hall et al., 2010).

2 An exception is the study report on SOI by Bertels et al. (2012) which considersproduct, process and systems innovation in more detail, though not in the contextof SMEs. Moreover, as the study was only published at the very end of the reviewprocess of the present paper, it was not further considered (but it should bementioned that Bertels et al. themselves borrow from an earlier version of thepresent paper; cf. Klewitz and Hansen, 2011).

J. Klewitz, E.G. Hansen / Journal of Cleaner Production xxx (2013) 1e19 3

(e.g. organic, recycled materials), high durability, low energyconsumption while the development of environmental orsustainable technologies (e.g. renewable energy technologies)represent entirely new products (Hart and Milstein, 2003; vanHemel and Cramer, 2002).

Gradually, this debate developed into one with a more holisticview on sustainability by covering both environmental and socialdimensions, consistently providing us with a myriad of terms suchas sustainable development innovation (e.g. Hall, 2002), sustainableinnovation (e.g. Hockerts, 2003; Wüstenhagen et al., 2008), CSR-driven innovation (e.g. Hockerts, 2009), sustainability-related inno-vation (e.g. Wagner, 2008), and sustainability-driven innovation (e.g.ADL, 2005). We build on the idea that innovation for sustainabilityis about relative improvements in comparison to a prior or otherentity. Therefore, we think of it as a process or direction towardsustainability which calls for deliberate management and conse-quently find the term sustainability-oriented innovation (Fichterand Paech, 2004; Hansen et al., 2009; Hansen and Klewitz,2012a; Hansen and Große-Dunker, 2013; Paech, 2005, 2007) mostsuitable. By becoming successful in the marketplace in niches oreven mass markets, SOIs create more sustainable productionmethods, market structures, and consumption patterns (cf.Schaltegger and Wagner, 2011: 223).

Additionally, SOIs can be differentiated into radical and incre-mental innovations, which refers to a general theme in innovationresearch (Benner and Tushman, 2002; Hall, 2002). Radical in-novations have more potential to influence the sustainable devel-opment of whole industries (e.g. Hoffrén and Apalajahti, 2009;Hansen et al., 2002) as they depart from current practice (Dewarand Dutton, 1986; Ettlie et al., 1984; Massa and Testa, 2008). How-ever, instead of clearly differentiating into either radical or incre-mental SOIs, wewould agree that they occur on a continuum as “thedistinction between radical and incremental innovations [.] is notone of hard and fast categories” (Dewar and Dutton, 1986: 1423).

2.3. SMEs

The second focus of the literature review lies on a specific typeof organization, that is, SMEs. They are a heterogeneous group interms of size and sector diversity (Hillary, 2006) and overall, it isdifficult to clearly define what an SME is, because countries adoptdifferent criteria (e.g. employment, sales, turnover) for definitionpurposes. However, mostly SMEs are defined by the amount ofemployees with a threshold between 100 and 500 (Ayyagari et al.,2007). To systematically review literature on SOIs of SMEs makessense for several reasons. First, SMEs build a large group inter-nationally which, for example, figures for OECD economies showwhere SMEs make out between 96% and 99% of the total numberof enterprises (OECD, 2002). Second, SMEs as a group contribute toa large share of overall pollution (cf. Hillary, 2000) e in the EUSMEs account for approximately 64% of pollution (ECEI, 2010).Third, SMEs are not simply smaller versions of their larger coun-terparts (Tilley, 2000; Welsh and White, 1981) and fourth ‘SMEpeculiarities’ (Noci and Verganti, 1999) imply that they willinnovate differently for sustainability (e.g. Moore and Manring,2009; for overview see Bos-Brouwers, 2010). On the one hand,literature highlights SMEs’ disadvantages (e.g. resource con-straints, lack of formalized planning, difficulty to attract finance)which may prevent them from engaging proactively in the inno-vation process (e.g. Del Brio and Junquera, 2003). From thisperspective e emphasized by most research e SMEs are consid-ered to display ‘reactive’ behavior toward environmental and so-cial issues. On the other hand, literature suggests that SMEs haveadvantages in that they are often characterized by an


entrepreneurial style with lean organizational structures (e.g. Bos-Brouwers, 2010; Darnall et al., 2010) dominated by their owner-managers (e.g. Jenkins, 2004; Spence, 1999), and can hence alsobe strongly value-driven (e.g. Jenkins, 2009). Thus, smaller com-panies may be in a better position, than, for example, large com-panies to innovate radically and compete successfully in nichemarkets with SOIs (e.g. Schaltegger and Wagner, 2011). We arguethat SMEs will innovate differently than larger companies, becausethey possess distinct organizational structures and capabilities forSOIs (cf. Aragón-Correa et al., 2008). This is further supported byliterature that shows different innovation degrees in SMEs as aresult of their strategies (Hansen and Klewitz, 2012a; Noci andVerganti, 1999; Sharma and Sharma, 2011). SMEs founded on thebasis of sustainability, which develop and successfully spread SOIs(often in niche markets) are also termed ecopreneurs and sus-tainable entrepreneurs (Hockerts and Wüstenhagen, 2010; Larson,2000; Parrish and Tilley, 2010; Pastakia, 1998; Schaltegger andWagner, 2011; Schaltegger, 2002; Tilley and Parrish, 2009) andare thus also covered by our definition of SMEs.1

2.4. Previous systematic reviews

A range of (systematic) reviews related to our research focushave been published earlier, however, they only partly overlap.Systematic reviews that address conventional innovation manage-ment in SMEs, for example Pittaway et al. (2004, see also Thorpeet al., 2005), take a knowledge perspective on innovation and re-view 209 articles. Hörte et al. (2008) systematically review 149papers and focus on product development in SMEs. Systematicreviews dealing with eco-innovation and broader sustainabilityissues in SMEs predominantly focus on drivers and barriers or onpublic policy levers for facilitating eco-innovation (see Table 1). Onereview by Hall et al. (2010) analyzes the development of the sus-tainable entrepreneurship literature. Whilst these prior reviewsdeal with the antecedents of SOIs, as to the knowledge of the au-thors, no systematic review exists on the SOI practices and theirinteraction in SMEs2 e which this paper will address.

With the definition of the key terminology on eco-innovation,SOIs, and SMEs as well as the presentation of prior systematic re-views done, we will present the applied method.

3. Method

This paper is based on a systematic review (Fink, 1998; Thorpeet al., 2005; Tranfield et al., 2003), a methodology which differsfrom conventional reviews in that it aims at “synthesizing researchin a systematic, transparent, and reproducible manner” (Tranfieldet al., 2003: 207). The rationale behind systematic reviews ischaracterized as: being transparent, focused, equal, and accessible,providing clarity, allowing for unification of research and practi-tioner communities, and overall leading to synthesis (Thorpe et al.,2005). It provides adequate evidence to inform policy and practice,as the diversity of knowledge is systematically managed (Thorpeet al., 2005; Tranfield et al., 2003). To enhance reliability of the


Table 1Related (systematic) literature reviews.a

Reference andmethod

Method Innovation perspective Main results

Hall et al., 2010 Literature review through BusinessSource Complete and of SpecialIssue (Journal of BusinessVenturing, 25, 2010).

Connects sustainable developmentwith entrepreneurship

Research stream on sustainable entrepreneurship relativelyyoung field (prior 2002 few publications; majority of papers inrelatively new sustainable development/environmental journals)./ Major gaps: conditions for SOIs (e.g. entrepreneurial venturesvs. incumbent firms, welfare-creating vs. welfare-destroying etc.)

Parker et al., 2009 Systematic review of peer-reviewedjournal articles between 2003 and2008 with a focus on empiricalresults. 50 articles were reviewed.

Environmental improvements Four different types of SMEs: profit, compliance, advantage, andenvironment driven SMEs.Seven types of policy interventions: voluntary regulations/standards,compulsory regulation, financial penalties, financial support,self-directed/facilitated education, environmental audits/reviews,business advice/help lines./ A tool kit of intervention strategies is proposed.

Walker et al., 2008 Literature review of 113 publicationswith additional snowballing method.

Environmental improvements Six drivers: voluntary engagement, stakeholders, legislation,resources, motivation, and knowledge.Key barriers from SME perspective: SME characteristics, resourceavailability and the owner-manager’s personal motivation, andknowledge about eco-innovation.From government perspective two main barriers: communicationand means to engage SMEs./ Education of SMEs as facilitator for eco- innovation.

Del Brío andJunquera, 2003

Review of the literature throughcombination of economicliterature with a focus on SMEpeculiarities.

Eco-innovation managementfrom a strategy perspective

Determinants of SMEs’ environmental strategy alternatives: financialresources, organizational structure, management style, humanresources, environmental management status, manufacturing activity,technological approach, innovative capacity, and external cooperation./ Due to SME peculiarities specific actions from policy initiativesare necessary.

a These reviews were not further included in the sample analysis as they are dealt with in this section and primarily focus on the antecedents of SOIs rather than theinnovation practices. Only the studies by Del Brío and Junquera (2003) and by Hall et al. (2010) were included in the sample as strategies and sustainable entrepreneurshipliterature is analyzed as separate themes (see Sections 5.1.1 and 5.1.2).


present research, two researchers (i.e. the co-authors) wereinvolved in the analysis.

The aim of our systematic review is to structure the researchfield on SOIs in the context of SMEs, identify emergent themes,point out the most important gaps, and thus contribute to theorydevelopment (Tranfield et al., 2003). A systematic review includesboth a quantitative, bibliographical analysis and a more qualitativethematic analysis (Tranfield et al., 2003). With reference to theprocess used in a study by Seuring et al. (2005, based on Mayring,2003), our literature review will consist of six procedural stepsillustrated in Table 2. Each step is described in further detail below.

3.1. Search process: steps 1 to 4

Step 1: The keywords (see Table 3) for the search were deducedfromthe abovedefinitionof eco-innovation, SOIs, andSMEs (Section2.1 and 2.2). The domains of SOIs and SMEs were operationalizedthrough three clouds of keywords, including innovation (e.g.

Table 2Individual steps of the systematic literature review.

Overall process Individual steps

Search process Step 1: Identification of keywords (35 key words)Step 2: Development of exclusion and inclusion criteria(e.g. cleaner production, eco-design, CSR innovation, diffusion,Step 3: Specification of relevant search engines and execution

Step 4: Development of A, B, and C listC-listB-listA-listNarrative inclusions (e.g. Anderson, 1998; Moore and ManringPastakia, 1998; Schaltegger, 2002; Hall et al., 2010)

Descriptive andThematic Analysis

Step 5: Descriptive categories (e.g. journals covered, methodol

Step 6: Deductive and inductive categories to identify central tand interpret results (e.g. EMS, life cycle analysis)


product development, process improvement, diffusion, sustainableentrepreneurship), sustainability (e.g. environment, ecology, green,societal), and SMEs (e.g. small business, medium-sized firm). Over-all, a total of 35 keywordswere used (Table 3). Target articles neededto match at least one keyword in each cloud. These clouds demon-strate again our objective to cover research at the intersection ofsustainability, innovation, andSMEs. In otherwords,weaim to coverarticles dealing with innovation practices in SMEs linked to sus-tainability (or, as explained earlier, partial environmental) perfor-mance improvements and distinct strategic sustainabilitybehaviors. Therefore and by no means does this review claim tocover all publications dealingwith either the encompassing conceptof sustainability and environmental management (including sys-tematic approaches such as management systems or certificationschemes) or innovation management in SMEs. For example, oursample only gives a brief overview of the overall broad literature onenvironmental management systems (EMS) such as ISO 14001 andEco-Management andAudit Scheme (EMAS) in SMEs (e.g. Burke and

Analysis Resulting #no articles.

Previous research and reviews ./.

life-cycle-analysis)./. ./.

of search (5 engines) Title and abstracts(automated based on keywords)

1996

./. 1996Title and abstracts (manual) 104Full text 71

, 2009; Full text (þ13)

ogies applied) 84

hemes 84


Table 3Keywords operationalized for search.

Search clouds Exemplary search string

Sustainability Innovation SMEs

Sustainab*, environ*, eco*,green, social, societal, ethic*,CSR, eco-efficiency, corporatesustainab*, sustainabledevelopment

Improvement, enhancement, diffusion,innovation, product stewardship, cleanerproductiona, ecopreneur*, bioneer,sustainable entrepreneurship,process improvement, corporatesustainability innovation, eco* innovation,sustainability oriented innovation, environ*strategy, R&D, research and development

Small business, mediumbusiness, small and mediumsized business, SME, smallfirm, medium firm, SMEs

Innovation OR “product stewardship” OR“product development” OR “processimprovement” OR improvement OR enhancementOR diffusion OR “eco efficiency” OR “cleanerproduction” OR ecopreneur* OR bioneer OR“sustainable entrepreneurship” OR entrepren*OR “environmental strateg*” AND sustainab*OR environm* OR eco* OR green OR CSR ORsocial OR ethic* OR “corporate sustainability”OR “sustainable development” OR “sustainabilityoriented” AND “small and medium sizedenterprise*” OR SME OR “medium business”OR “small business” OR “small firm” OR“medium firm”

a Cleaner production was considered as innovation term, as it covers many articles focusing on process innovations.


Gaughran, 2007; Halila, 2004; Yiridoe andMarett, 2004), as we onlyincluded articles that fit our positive inclusion list, that is, articleswith a specific innovation perspective on EMS (e.g. Halila, 2007).

Step 2: Though systematic reviews can also include other typesof publications, to guarantee quality and to reduce the sample to amanageable amount, we followed other scholars and concentratedon peer-reviewed academic journal papers in English language (e.g.Seuring and Müller, 2008). With regard to the timeframe covered,we argue that SOIs have received prominent attention withinpractice and international research since the publication of theBrundtland report “Our common future” (WCED, 1987). Therefore,this review covers academic papers in the period between 1987 and2010. Taking into account the above terminology on SMEs (Section2.2) we are interested in companies beyond the start-up phase.

Step 3 and 4: This review includes the following major researchdatabases: EBSCO, EMERALD, ISI Web of Science, Scopus, andWileyOnline. The scope of these databases supported our interdisci-plinary goal of covering literature from sustainability and envi-ronmental management, innovation and technology management,as well as entrepreneurship. Each database and related search en-gine works with different syntax and thus adapted search stringswere necessary in many cases. In our case, four variations of searchstrings were used overall, but they were all within the range of thekey terms. Originally, we started out with a database of 1996 arti-cles which we categorized into A (most relevant), B (less relevant),and C (not relevant). The initial C-list of 1996 articles was firstreduced on the basis of title and abstract analysis to 104 relevantarticles (B-list). This B-list was analyzed in-depth (title, abstract, fulltext) in an iterative process and we had to eliminate another 33articles. Themost common reasons for eliminating articles from theinitial B-list include a lack of SME focus (instead companies ingeneral, start-up focus), a dominant practitioner’s focus (e.g.training guidelines, management principles, program tools), or astrong focus on drivers and barriers for sustainability managementin general, rather than on the innovation practice itself. Wemanually added 13 highly relevant articles (e.g. Larson, 2000;Moore and Manring, 2009; Parrish and Foxon, 2009; Pastakia,1998; Schaltegger, 2002) to the A-list that we identifiedthroughout the research process but which were unintentionallyeliminated by the “one keyword per cloud rule” due to a problem ofthe rule’s logic (i.e. entrepreneurship articles often deal with“SME”-type organizations without using the term SME). This weremedied by an additional search (narrative inclusion) and wereconsequently able to include these articles. The resulting A-list with84 articles was then further pursued in both the descriptive andthematic analysis.


3.2. Descriptive and thematic analysis: steps 5 to 6

Step 5: For the descriptive analysis we selected categories thatdescribe the papers in terms of e.g. journals covered or methodsapplied (cf. Seuring and Müller, 2008).

Step 6: For the thematic analysis, we used deductive categorieswhich we gained from prior literature reviews (cf. afore presentedTables 1 and 3) and inductive categories that emerged during theevaluation e hence, an abductive approach (Reichertz, 2010). Theaim is to systematically categorize the content of the papers andidentify relationships (cf. Lane et al., 2006). This synthesis process isinductive and interpretative, but as Thorpe et al. (2005: 261) pointout: “the adoption of an explicit and rigorous approach to reviewingallowsothers to understand howandwhy studieswere selected andthemes build up.”

The results are structured in two parts: first, we provide aquantitative descriptive (bibliographical) analysis to get an over-view on the research agenda on SOIs of SMEs. Second, we present aqualitative thematic analysis to provide an in-depth analysis ofSMEs’ innovation practices concerning both their strategic sus-tainability behavior and how this links to product, process, andorganizational innovation.

4. Results of the descriptive analysis

The most important journals for SOI research in SMEs (in thesense that more than one article was published by them) identifiedare those with a sustainability or environmental focus, with theJournal of Cleaner Production taking a dominant role. There are alsoarticles in more mainstream innovation journals such as R&DManagement (Fig. 1), but these play, in comparison to sustainabilityoriented journals, a marginal role in our sample.

With 45 articles, the most important source of empirical evi-dence in the sample is qualitative approaches where case studies(single, illustrative, and multi-case studies together) are the mostfrequently applied method. Further qualitative studies used inter-view studies (7 articles) and action research (2 articles). There werealso 7 papers with a multi-method approach, 4 conceptual papers,2 systematic reviews, and 1 paper based on document analysis. For2 papers the method was not further specified in accordance to ourcategories. Studies using quantitative approaches are also ofimportance with 23 articles. The studies focus on diverse countriesfrom virtually all continents with 16 studies taking a cross-countryfocus (“multiple”). With respect to single countries, the UK, theNetherlands, Australia, and Canada take the lead (Fig. 2). Moststudies focus on a single country.


2

2

2

2

2

2

2

2

2

2

3

3

6

21

0 5 10 15 20 25

International Journal of Environmental Technology & Management

International Journal of Life-Cycle Assessment

Business & Society

Corporate Social Responsibility and Environmental Management

Ecological Economics

R&D Management

Journal of Business Venturing

Resources Conservation and Recycling

Environment and Planning A

Technology Analysis & Strategic Management

Business Strategy and the Environment

Journal of Business Ethics

Greener Management International

Journal of Cleaner Production

Journalsn=84, included if >1 article

Fig. 1. Most important journals.


Our analysis shows that SOI research of SMEs is still a youngfield, which started to evolve in the mid-nineties with a surge ofpublications from 2008 until present (see Fig. 3).

Overall, the results show that our sample is strong on eco-innovations in SMEs with 60 articles and articles that explicitlydeal with SOIs amount to 23 articles with one article in our sampleexplicitly dealing with social innovation (Joore, 2008). For thesubsequent thematic analysis it has to be noted that the majorityof articles in our sample are based on a qualitative approach (seeabove) which requires a more interpretative analysis to SOIpractices of SMEs but with 23 quantitative studies we canadequately enrich the picture.3 In the next section, we will presentand discuss our results from the thematic analysis based on theA-list.

5

6

7

8

16

Canada

Australia

Netherlands

UK

Multiple

Countries focusedn=84, included if >1 article

5. Results of the thematic analysis

The purpose of the thematic analysis is to identify essential el-ements and dimensions of SOI practices in an SME context. Weidentified two major building blocks of SOI practices in SMEs: theSME’s strategic sustainability behavior and the pursued innovationtypes. In each of these building blocks we employed both deductivecodes (e.g. product innovation) and inductive (sub)codes (e.g. lifecycle assessment) that emerged from the data. In order to addressour research question, we will next analyze the strategic sustain-ability behavior of SMEs, as they are the basis for the actual in-novations pursued.

3

3

3

3

4

4

5

Italy

Sweden

US

Taiwan

South Korea

Spain

not specified

5.1. Strategic sustainability behavior of SMEs

The present section analyses the sample with regard to, first,different strategic sustainability behaviors of SMEs and, second, theconcept of sustainable entrepreneurship.

3 For purpose of clarity we will distinguish in Section 5 references to articles fromthe sample on the one hand, and additional literature used for definition purposesor explanations which are indexed with [!], on the other.


5.1.1. Existing taxonomies of sustainability strategiesOverall,we identified11 (fromoverall 84) articleswith anexplicit

strategy perspective on SOI (Aragón-Correa et al., 2008; Bianchi andNoci, 1998; Darnall et al., 2010; Del Brío and Junquera, 2003;Grávalos et al., 2002; Hansen et al., 2002; Martín-Tapia et al., 2008,2010; Moore and Manring, 2009; Noci and Verganti, 1999; Tilley,1999). With strategy taxonomies generally ranging from reactiveto proactive behaviors they relate to the continuum from incre-mental to radical innovation and thus facilitate our understandingofthe SMEs’ innovation behaviors and the related product, process,and organizational innovations (see Table 4).

In our sample, Aragón-Correa et al. (2008) find that SME inno-vation behavior is not restricted to reactions to, for example, reg-ulations. Instead they may aim to proactively achieveenvironmental performance improvements and even displayenvironmental leadership behavior. Such proactive strategic be-haviors can lead to improved or new processes and products and itis largely dependent on an SME’s resources, capabilities, andcompetencies. For such a strategy SMEs can make use of their

2

2

0 2 4 6 8 10 12 14 16 18

New Zealand

China

Fig. 2. Countries focused in studies.


21

43

2 2

7

54

5 5

7

13

10

14

0

2

4

6

8

10

12

14

16

1994 1996 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Year of publicationn=84

Fig. 3. Year of publication.

4 It should be noted that some part of the sustainable entrepreneurship literatureis interested in the dynamic interaction between small and large firms and theimpact thereof on industry transformation and consequently cover both large andsmall firms in one article (e.g. Hockerts and Wüstenhagen, 2010).


unique strategic characteristics, e.g. flat organization, foundervision, flexibility, and entrepreneurial style (Aragón-Correa et al.,2008). For example, proactive strategies steer SMEs toward SOIsthrough eco-efficient practices, increased waste and pollutionprevention measures, or reduced material use (e.g. Aragón-Correaet al., 2008). Moore and Manring (2009: 280) argue that if SMEssucceed in integrating social and environmental issues into corebusiness strategy “they will expand opportunities for innovation byincreasing their opportunities for rapid learning”.

Noci and Verganti (1999) further split strategic sustainabilitybehavior into three behaviors for SMEs: reactive (reaction to externalstimuli), anticipatory (time initiatives to realize competitive advan-tage), and innovation-based. Reactive and anticipatory strategies aremore likely to lead to incremental innovations as they mainlyrespond to external changes (i.e. new environmental regulations,local pressures) (Bianchi and Noci, 1998: 276e277). Innovation-based strategies potentially lead to more radical innovations on aprocess, organizational, and product level (Noci and Verganti, 1999).Radical innovations by SMEs are of particular interest as they havemore potential to influence the sustainable development of wholeindustries (e.g. Hoffrén and Apalajahti, 2009; Hansen et al., 2002).

These more radical strategies also reflect the entrepreneurialbusiness that SMEs often are, expressed in the owner-manager’ssustainability vision or commitment as well as their successful posi-tioning in niche markets with SOIs (e.g. Moore and Manring, 2009).SMEs can provide the necessary disruptive and radical innovationsoutside established and inflexible structures of incumbents (Mooreand Manring, 2009). Hence, SMEs can achieve disruptive andradical SOIs based on their strategies, core competencies, and capa-bilities (Aragón-Correa et al., 2008; Hansen et al., 2002) which arenurturedbyanentrepreneurial approach (Moore andManring, 2009).

A fourth type of strategic sustainability behavior, which goesbeyond innovation-based and even environmental leadershipbehavior, is found in Tilley’s (1999) analysis. Here, the ‘sustainable/ecological strategy’ is introducedwhich explicitly focuses on radicalinnovations. This behavior requires a “shift in the dominantworldview” and an “ecocentric ‘deep-ecology’ approach” in orderto “rethink [.] all aspects of business” and pursue “a holisticintegration of the environment into the structure and managementof the business” (Tilley, 1999: 71). Ultimately, “sustainable/ecolog-ical business models” are sought (Tilley, 1999: 76). While Tilleyregistered that there is few to no knowledge on this type of SME, agrowing body of literature on entrepreneurial firms pursuingradical innovationse referred to as sustainable entrepreneurshipe

has emerged and is presented next.


5.1.2. Sustainable entrepreneurshipFrom an SME perspective, sustainable entrepreneurship (or

ecopreneurship) deals with entrepreneurial companies thatdevelop and successfully spread SOIs primarily in niche markets,but subsequently also in mass markets (e.g. Schaltegger, 2002).Their entire business model is based on combining ecological andsocial issues with economic success (e.g. organic and fair-tradeproducts) meaning that social and/or environmental goals canhave the same, sometimes even higher priority than economicgoals. In our sample they are characterized as SMEs that are inno-vative, market-oriented, personality-driven entities that focus onmore sustainable offerings in themarket (e.g. Anderson,1998; Cralsand Vereeck, 2005; Rodgers, 2010). In contrast to SME innovationefforts discussed in the previous subsection, sustainable entrepre-neurship deals explicitly with more radical forms of innovation(Hockerts and Wüstenhagen, 2010). Though not limited to it,existing literature on sustainable entrepreneurship often takes abusiness-to-consumer perspective (e.g. Kearins et al., 2010).

In our sample, there are 15 articles on sustainable entrepre-neurship (Anderson, 1998; Azmat and Samaratunge, 2009; Cralsand Vereeck, 2005; De Palma and Dobes, 2010; Hall et al., 2010;Hockerts and Wüstenhagen, 2010; Kearins et al., 2010; Kirkwoodand Walton, 2010; Larson, 2000; Parrish and Foxon, 2009;Pastakia, 1998; Rodgers, 2010; Schaltegger, 2002; Schaper andSavery, 2004; Tilley and Parrish, 2009) with a specific SMEperspective (or at least covering SMEs together with incumbents).4

Our analysis indicates that sustainable entrepreneurship in-fluences the development of industries toward sustainabilitythrough changing consumption patterns and market structureswith the supply of products that lead to a reduction of the envi-ronmental impact (e.g. Hockerts and Wüstenhagen, 2010;Schaltegger, 2002). They may also develop the necessary in-stitutions (Hall et al., 2010) such as standard and certificationschemes and professional bodies and networks.

Furthermore, in our sample sustainable entrepreneurship isoften associated with distinct owner-manager values and a specificculture (e.g. Anderson, 1998; Kearins et al., 2010), that is, anentrepreneurial approach to solve environmental and social prob-lems through business activities evolves into a vehicle for social


Table 4Environmental strategy in SMEs and potential influence on sustainability-oriented product, process, and organizational innovations.

Name of concept Strategy taxonomy Lead authors Explanatory power of taxonomy for strategic sustainability behavior

Environmentalstrategy

1. (Reactive)2. Proactive3. Environmentalleadership

Aragón-Correa et al. (2008) Proactive sustainability behavior is demonstrated in SMEs thatare capable to identify sustainability issues and markets for SOIsin a way to realize competitive advantages (e.g. first moveradvantages in niche markets). A proactive sustainability strategyrelies on distinct organizational capabilities which are a resultof strategic SME characteristics such as flexibility or entrepreneurialowner-manager behavior.Environmental leadership behavior leads to the re-design of products,processes, and even business models from a product life cycle perspective.

Green strategy 1. Reactive2. Anticipatory3. Innovation-based

Bianchi and Noci, 1998;Noci and Verganti, 1999

Reactive SMEs only respond to external stimuli, for example,environmental regulations. Their innovation behavior cannot be expectedto be go beyond incremental innovation.Anticipatory SMEs are capable to identify environmental and social issuesas sources of future competitive advantage.Innovation-based SMEs identify environmental and social issues as asource of innovation themselves and base their entire business modelon SOI.

Environmentalstrategic behavior

1. Negative2. Neutral3. Positive

Hansen et al., 2002 Negative strategic behavior is linked to minor search efforts and islimited to reducing costs and achieving compliance with regulation.Positive strategic behavior is linked to proactive search strategies forenvironmental information aiming at competitive advantage throughenvironmental competencies, performance, and green premiums.

Environmentalstrategies

1. Resistant strategy2. Reactive strategy3. Proactive strategy4. Sustainable/ecologicalstrategy

Tilley, 1999 This taxonomy classifies SME innovation behavior into four behaviors.Resistant SMEs choose to ignore the presence of environmental orsocial issues and continue to do business as usual.Reactive SMEs respond the environmental pressures and engage inminimum performance improvements.Proactive SMEs deliberately (and systematically) engage in environmentalperformance improvements.A sustainable/ecological strategy guides SMEs will radically transformits entire business model in accordance to the triple bottom line.


change, with the sustainable entrepreneur as change agent (e.g.Anderson, 1998).

We also identified intriguing issues related to growth strategies.For instance, Schaltegger (2002) argues that it is essential to diffuseSOIs not only in niche but also in mass markets in order to sub-stantially affect the transition toward sustainable development.However, entrepreneurial SMEsmay also prefer to stay small ratherthan grow big as this ensures them higher independence (e.g. interms of financial independence or with regard to expectationsfrom diverse external stakeholders) and freedom to develop theirbusiness in a more value-drivenway as an example by Kearins et al.(2010: 539) shows:

“However, a key insight derives from the entrepreneur’swholehearted association with the new ecological paradigmand thus fundamental drive and commitment to put nature firstand to seek to promote humanenature connectedness throughher business. Such businesses may struggle to convince othersand get the support they need to grow. But, growth of thebusiness may not be seen as important as encouraging wideracceptance of the underpinning vision.”

Hockerts and Wüstenhagen (2010) argue that the trans-formation of industries toward sustainable development requiresthe interplay between new entrants (for example SMEs) and in-cumbents, with the former introducing radical innovations and thelatter adapting these to mass markets. While this is often the casethrough learning from each other, more direct interactions be-tween new entrants and incumbents also exist. Taking into accountall these suggested potentials of sustainable entrepreneurship, itshould also be mentioned that sustainable entrepreneurship is nota panacea (Hall et al., 2010). Having analyzed the strategies andentrepreneurial orientation of SMEs to engage in SOI we will nextpresent our results on the innovation practices of SMEs and showhow they interact.


5.2. SOI practices and innovation types

We identified innovation practices of SMEs on the process,organizational, and product level. For purpose of clarity we cate-gorized these practices into concepts covering broader approachesand methods such as cleaner production or eco-efficiency, toolssuch as life-cycle analysis or environmental policy, as well as morespecific areas of innovation practice, such as logistics or organiza-tional structures. For each innovation level we will analyze first theconcepts, followed by the tools and then the areas of practice with aconcise overview provided in Table 5.

5.2.1. Process innovationsSOI at the process level challenges SMEs to redesign operations

within the value chain to produce goods and services by using lessresources, managing non-product output effectively (waste, haz-ardous materials, sewage etc.), and increasing the eco-efficiency ofproduction activities.

Cleaner production in general, is defined as “the continuousapplication of an integrated preventive environmental strategyapplied to processes, products and services to increase overall ef-ficiency and reduce risks to humans and the environment” (UNEP,2002[!]: 5). Even though this definition also covers products andservices, it is historically rooted in production processes and ishence dealt with here in this narrower context. In our sample,cleaner production was especially concerned with the adoption ofenvironmentally-friendly technologies, good housekeeping, orinput substitution (e.g. Altham, 2007; De Palma and Dobes, 2010;van Berkel, 2007; Luken and Navratil, 2004; Shi et al., 2008; vander Vlist and Holmer, 2009). SMEs engage in cleaner productionto speed up production processes and raise productivity throughcleaner technologies (Biondi et al., 2002). By achieving greenermanufacturing processes SMEs can deal with sector specific envi-ronmental challenges (Lefebvre et al., 2001). Cleaner production


Table 5Subthemes of product, process, and organizational innovations for sustainability.

Emergent subthemes No. of articlesa Exemplary authors

Process innovationsCleaner productiond 29 Ab Rahman et al., 2009; Altham, 2007; Hicks and Dietmar, 2007;

Luken and Navratil, 2004Waste handling (e.g. recycling, water, sewage, air pollution)f,g 16 Ackroyd et al., 2008; Caird et al., 1994; Fernández-Viné et al., 2010

Eco-efficiencyd 23 Aragón-Correa et al., 2008; Côté et al., 2006; Howgrave-Grahamand van Berkel, 2007

Logistics (e.g. efficient transportation)f 5 Bos-Brouwers, 2010; Fernández-Viné et al., 2010;Organizational innovationsEMSd 24b Christensen and Niels, 1996; Gunningham, 2002; Halila, 2007;

McKeiver and Gadenne, 2005ISO 14001/EMASe,g 20 Balzarova and Castka, 2008; Heras and Arana, 2010Environmental policye,g 4 Fresner, 1998; Tilley, 1999Environmental management accountinge,g 1 Staniskis and Stasiskiene, 2006

Innovation process (e.g. interaction withexternal actors, biomimicry)d

19 Kearins et al., 2010; Larson, 2000; Hansen et al., 2002

Supply chain managementd 17 Lee and Klassen, 2008, Kirkwood and Walton, 2010, Larson, 2000Local sourcing (and production)f,g 3 Kirkwood and Walton, 2010, Rodgers, 2010

Stakeholder management (e.g. dialog)d 11 Aragón-Correa et al., 2008; Jenkins, 2009; Siebenhühnerand Arnold, 2007

Organizational structures (e.g. environmental department/team)e 10 Fresner, 1998; Gärdström and Norrthon, 1994; Jenkins, 2009Sustainability visione 6 Crals and Vereeck, 2005; Fresner, 1998; Larson, 2000Employee development and traininge 3 Crals and Vereeck, 2005; Jenkins, 2009; Lee, 2009Code of Conducte 1 Bos-Brouwers, 2010Employee engagement in sustainability/CSR activitiese 1 Jenkins, 2009Health and safetyf 3 Jenkins, 2009; Kess et al., 2009; Visser, 2008

Product innovationsEco-design/design for the environmentd 17 Bos-Brouwers, 2010; Jimenez, 2005; van Hemel and Cramer, 2002Life-cycle-analysise 10 Pesonen, 2001; Zackrisson et al., 2008; Sonnemanm and de Leeuw, 2006Ecolabel (e.g. organic/fair trade certification)e 3 Craals and Vereeck, 2005; Hitchens et al., 2005; Visser, 2008Life-cycle-costinge 2 Suh et al., 2005; Michelsen and Fet, 2010Materials (reduce, replace, sustainable;e.g. recycled resources, biodegradables)f

15 Chen 2008a; Lee, 2009; Rodgers, 2010

Packagingf 6 Fernández-Viné et al., 2010; Noci and Verganti, 1999Fair-trade and organic productsf 5 Blay-Palmer and Donald, 2006; Hitchens et al., 2005; Kearings, 2010

Not specifiedc 1 Anderson, 1998

a An article could qualify for more than one subtheme (Table 7 gives an overview on the interactions of the single categories within articles).b EMS’ are discussed critically and some empirical studies show that formalized EMS’ in SMEs are not practiced widely (e.g. Lefebvre et al., 2001; Lefebvre et al., 2003).c Strongly conceptual paper on ecopreneurship.d Overarching concepts and systems.e Specific tools, instruments, standards, or structures.f Specific areas of innovation practice.g Subcode of main code above (e.g. waste handling as subcode of cleaner production).


enables smaller companies to respond to regulations by adoptingcleaner technologies (e.g. Noci and Verganti, 1999) or to raise theindustry standards in line with ecological modernization (e.g.Sonnenfeld, 2000). Hence, cleaner production may yield far moreinnovation potential than just improvements at the process level ifSMEs achieve learning effects at the organizational level, as vanBerkel (2007: 686) argues:

“Cleaner production aims to achieve a different organisationalmindset to environmental management and resource use, andthereby establish a continuous environmental improvementprocess, or ensure integration of environmental and resourceconsiderations in already existing continuous improvementprocesses in the organisation.”

Within the code cleaner production, waste handling, was anadditional subtheme which occurred frequently within the samplewithout the studies necessarily referring to the broader concept ofcleaner production. Waste handling as related to operations withinthe value chain and production activities in our sample referred torecycling measures, disposal of material, reduced waste waterdischarges, or improved sewage control (e.g. De Palma and Dobes,2010). But, cleaner production may turn out to be a demandingtool for SMEs as a study by Howgrave-Graham and van Berkel(2007) finds which may lead to few SMEs actually taking upcleaner production as a means to innovate.


A concept strongly related to cleaner production is eco-efficiency.As for cleaner production, the conceptual understanding of eco-efficiency is today understood much more broadly, however, in thepresent analysis we consider it more narrowly as related to pro-cesses only. In contrast to cleaner production, eco-efficiency places astronger emphasis on gaining economic benefits (e.g. Côté et al.,2006). This reflects the initial definition in the seminal work bySchaltegger and colleagues that economic and environmental per-formances are combined to create economic gainwhile reducing thenegative environmental impact (Schaltegger and Sturm, 1990[!];Schaltegger and Synnestvedt, 2002[!]; also: WBCSD, 2000[!]). Withits focusoneconomicgains, eco-efficiency is alsooftenconsideredasan entry ticket to environmental and sustainability performanceimprovements. More specifically, SMEsmight be able to reap short-term benefits in terms of picking the lowhanging fruitswith limitedresource commitment (e.g. Côté et al., 2006; Klewitz et al., 2012[!]).Often it is understood as resource and energy efficiency. Forexample, eco-efficiency may encompass measures such as energysaving projects within the firm (e.g. Bos-Brouwers, 2010), reducedmaterial and resource use (e.g. Côté et al., 2006), or changes inprocedures or replacement of inefficient equipment (e.g. Lee andKlassen, 2008). But, Fernández-Viné et al. (2010: 736) also criti-cally analyze in their empirical study the adoption of eco-efficiencyin SMEs and find that it may not be perceived adequately as anincentive to improve competitiveness.



Although we differentiate between cleaner production and eco-efficiency, these two concepts were developed in parallel and thusstrongly overlap (WBCSD, 2000[!]: 13). Thus, even though cleanerproduction emphasizes minimizing environmental impacts andeco-efficiency emphasizes economic gains, the outcome ofapplying either of the concepts in a business process may be thesame (Howgrave-Graham and van Berkel, 2007). While cleanerproduction and eco-efficiency present overarching concepts, wealso identified logistics as a more specific area of processinnovation.

Logistics is important for SOI, because it deals with efficienttransportation networks, shifts in transportation modes, new dis-tribution channels, or fleet management (e.g. Kirkwood andWalton, 2010). For instance, SMEs may introduce process changesin terms of transportation modes to maximize environmental ef-ficiency of product transportation and delivery (e.g. Fernández-Viné et al., 2010), change from road to water transport (e.g. Bos-Brouwers, 2010), or develop new distribution channels with ef-fects on product recognition (e.g. Blay-Palmer and Donald, 2006).

Overall, SMEs benefit from innovations in their processes in thatthey reduce energy consumption and waste output. If SMEsmanage to move toward cleaner and more eco-efficient productionthis may yield innovation potential in terms of redesigning, forinstance, their packaging systems. Through shifts in transportationmodes SMEs may also secure their value chains and achieve inno-vation effects along their supply chain.

5.2.2. Organizational innovationAs already pointed out in Section 2, the differentiation between

process and organizational innovations occurs on a fine line as theyare borderline type innovations (OECD, 2005[!]). A frequently dis-cussed concept for organizational innovationswere EMS as ameansto systematically manage environmental issues. This umbrellacategory contains specific EMS standards such as ISO 14001 (e.g.Bos-Brouwers, 2010; Halila, 2007) and EMAS (e.g. Mazzanti andZoboli, 2009; Pesonen, 2001), but also specific tools as elements ofEMS such as the environmental policy (e.g. Fresner, 1998) andenvironmental management accounting (Staniskis and Sasiskiene,2006). Though an important theme, the analysis of these articlesshowed mixed results. The minority of SMEs seems to employ EMS.For example, Fernández-Viné et al., 2010 find in their quantitativestudy that only 7% of SMEs use ISO-conform EMS and 11% use self-developed systems, while the rest has no EMS at all. In a similarvein, Hitchens et al. (2003: 54) with their multi-method approachconclude that: “Initiatives associatedwith solvent reduction or EMSwere less common and tended to be associated with the betterperforming firms [.].” Lefebvre et al. (2001) suggest from theirquantitative study that a formal EMS is seldom used in SMEs. Areason for lowimplementation is, forexample, thehighly formalizedprocess of EMS which stands in contrast to the more informalmanagement systems of SMEs. In light of these mixed results withregard to low implementation rates but at the same time identifiedinnovation potential of EMS, studies in our sample highlight how tofacilitate SMEs to adopt an EMS more efficiently through the jointeffort of network members (e.g. Halila, 2007).

Another frequently discussed concept refers to supply chainmanagement. On the one hand, SMEs in their role as suppliers canuse tools such as ISO 14001 certification and EMAS to securecompetitive advantage and respond to downstream supply chainpressures (e.g. Bos-Brouwers, 2010; Lee and Klassen, 2008; Lefebvreet al., 2003). On the other, SMEs may themselves engage in sus-tainable supply chain management (i.e. the integration of environ-mental and social issues in traditional supply chain management;e.g. Carter and Rogers, 2008[!]; Gold et al., 2010[!]; Seuring andMüller, 2008[!]), to achieve SOIs (e.g. Kirkwood and Walton, 2010).


Through supply chain management that leads to more sustainableproducts (Seuring and Müller, 2008[!]), SMEs may influence theircustomers and suppliers, for instance, through cleaner productionprojects (Gärdström and Norrthon, 1994: 204e205).

Though strongly linked to and heavily influencing supply chainmanagement, still a separate subtheme is local sourcing (and pro-duction). This approach focuses on producing in own local facilities(i.e. in the sense of vertical integration) or procurement from (anarrow selection of) regional suppliers which can significantlydecrease transport emissions but also eliminate social problems inthe supply chain (e.g. labor issues in the production in developingnations). Thus, through applying local sourcing and productionparadigms, SMEs may radically remodel their supply chain (e.g.Rodgers, 2010). This new approach requires a strategic decision bythe management and is thus considered an organizational inno-vation (in contrast to mere logistics). Local sourcing may proveparticularly important if SMEs aim to take into account environ-mental and social costs of procurement while trying to achieveeffects at the product level in terms of (local) branding (e.g. Kearinset al., 2010; Kirkwood and Walton, 2010; Rodgers, 2010).

Other tools for organizational innovations in our sample werestakeholder management, sustainability vision, code of conduct,employee development and training, and employee engagement insustainability/CSR activities. Stakeholders are broadly discussed inthe sample, for instance, as to how they can push SMEs towardproactive strategies (e.g. Bianchi andNoci,1998; Darnall et al., 2010).More specifically, a range of studies look into the practice of SMEsactively managing their stakeholders (e.g. employees, community;Jenkins, 2009) as an organizational capability (e.g. Aragón-Correaet al., 2008) or through dialogs and means of communication (e.g.SiebenhühnerandArnold, 2007).Other studies (e.g. Lee andKlassen,2008) show that SMEs may be initially reluctant to engage instakeholder management (e.g. communication with local commu-nities). Thus, stakeholdermanagement in SMEs ismost likely to varyin terms of its systematic approach and the types of stakeholders.This may also vary depending on the business-to-business orbusiness-to-consumer context as well as the type of industry theSMEs are operating in. Designing and implementing a sustainabilityvision based on owner-manager values can develop into a coredriver for overall organizational development (e.g. Kearins et al.,2010; Larson, 2000; Rodgers, 2010; Parrish and Foxon, 2009). Todeal with ethics and transparency the code of conduct was alsobroached (Bos-Brouwers, 2010). Engaging employees in the devel-opmentof the sustainablebusiness canbe supportedby tools suchasdevelopment and training schemes (e.g. Crals and Vereeck, 2005;Jenkins, 2009; Lee, 2009) or supporting employee engagement insustainability or CSR activities (e.g. Jenkins, 2009).

Areas of innovation practices were matched with organizationalstructures as well as health and safety. Organizational structures arerelated to, for example, the introduction of environmental de-partments, teams, or cross-functional units and committees (e.g.Fresner, 1998; Gärdström and Norrthon, 1994). Health and safetymeasures or trainingswere alsomentioned (e.g. Jenkins, 2009; Kesset al., 2009; Visser, 2008).

Last but not least, a final organizational innovation to betterfacilitate SOI is the redesign of the company’s innovation processitself ewhich can thus be referred to as ameta innovation practice.We found two major mechanisms: first, through integrating newinnovation principles and second interacting more strongly withexternal innovation actors. Regarding innovation principles, SMEscan begin to recognize the environment itself as a design principlein that they see “nature as a basis for creating a visionary, com-mercial opportunity, which sought to transcend and transformcurrent industry practice” (Kearins et al., 2010: 537). Such a holisticapproach e usually referred to as biomimicry e is also shown in a



case study by Rodgers (2010) where nature design principles affectthe entire organization. Hence, rather than improving and adjust-ing organizational structures to incrementally improve the productportfolio in response to supplier, regulatory, or customer demands,the environment itself is the central pool for innovation in terms ofusing its materials, mimicking its processes, and for sourcing ideas(e.g. Kearins et al., 2010; Rodgers, 2010). Another approach toremodeling the innovation process for SOIs can be achieved byincreasing the reflexivity of the process through the interactionwith external actors from the SMEs’ value chain (e.g. customers,suppliers), regulatory environment (e.g. local authorities), andknowledge network (e.g. universities) (cf. Hansen et al., 2002 fordefinition purposes). In our sample we identified a range of rele-vant external actors such as customers or larger buyers (value chainnetwork), governments or authorities (regulatory network), as wellas universities and research centers (knowledge network). Forexample, the interaction with partners from the value chainnetwork in supply chains gives buyers better control over theirsuppliers, while suppliers are given more planning security andincentives for SOIs (e.g. Biondi et al., 2002; Pesonen, 2001). Aspartners from the regulatory network, governments or authoritiescan function as role model, regulator, capability-builder, financialsupport provider, and disseminator of information particularlyregarding environmental and social challenges (e.g. Clement andHansen, 2003; Grávalos et al., 2002; Gombault and Versteege,1999; Hansen et al., 2002; Hansen and Klewitz, 2012b[!]). In inter-action with partners from their knowledge network (e.g. Hansenet al., 2002), in particular universities and research centers, SMEscan receive support in dealing with the multi-dimensional natureand complexity of SOIs (Hansen and Klewitz, 2012a[!]). The inter-action with non-traditional (“fringe”) actors in the innovationprocess can lead to radical innovations and entirely new businessmodels, as a case study by Parrish and Foxon (2009) illustrates.Hansen et al. (2002) show how SMEs make use of interaction withtheir partners from the regulatory, value chain, and knowledgenetwork to acquire different types of information and how, ulti-mately, an SME’s innovative capability is influenced by a dynamictriangle of competencies, strategies, and network relations.

5.2.3. Product innovationIn order to improve the sustainability performance of products

an overarching concept is represented by eco-design (Lefebvre et al.,2003: 267). While eco-design or design for the environment orig-inally focused on the environmental dimension, it is now oftenunderstood more broadly in the sense of ‘design for sustainability’.Eco-design covers all activities from pre-manufacturing to end-of-life, that is, it takes a life-cycle perspective (Lefebvre et al., 2003:267). It revolves around the concept, architecture, individualcomponents, production, and logistics of a product (e.g. Noci andVerganti, 1999). It includes eco-design principles such as adapt-able product structures, energy saving properties, eco-friendlymaterials, product durability and longevity, refurbishing, recycla-bility (e.g. Fernández-Viné et al., 2010; van Hemel and Cramer,2002), product redesign (e.g. Bos-Brouwers, 2010), or reduction ofraw materials (Lefebvre et al., 2003). Ultimately, it requires an SMEto consider the means to repair, reuse, disassemble, remanufacture,and/or recycle a product (e.g. Chen, 2008a; Lefebvre et al., 2001).

Depending on the complexity of the product, for example in theelectronic product sector, SMEs may find it particularly challengingto select environmentally benign raw materials or substantiallyreduce energy consumption (e.g. Lefebvre et al., 2001) withoutsignificantly investing in R&D activities. For instance, Fernández-Viné et al. (2010: 742) find in their survey that SMEs may adopteco-design practices (44% in their study) but are overall restrictedin their activities in that these are neither based on product life


cycle analysis nor on environmental impact assessments. However,eco-design not only relies on finding alternative technical solutionsbut also on a range of external (e.g. customer demands, governmentregulations) and internal stimuli (e.g. innovation opportunities,increase in product quality), and on how SMEs perceive the marketopportunities for environmentally superior products (e.g. vanHemel and Cramer, 2002). Furthermore, these eco-design princi-ples need to fit to the business and technological strategy of anSME, require SMEs to build up competencies (e.g. Noci andVerganti, 1999), and engage in major sustainability R&D activitieswhichmay yield the highest potential for radical innovations, at theproduct level.

A central analytical tool in our sample referred to life-cycle-analysis which serves to achieve a more environmental-benignproduct design through improving the entire life cycle of a prod-uct (e.g. Pesonen, 2001) by measuring the resource consumption,environmental impacts, and release of waste along the whole lifecycle of a product, that is, from raw materials extraction to finaldisposal (e.g. González et al., 2002). This life-cycle thinking goesbeyond traditional life-cycle-costing which analyzes economic as-pects in the product life-cycle (e.g. Michelsen and Fet, 2010). AsGonzález et al. (2002: 78) suggest from a qualitative study:“Nowadays it is obvious that life cycle analysis is an efficient tool forimproving product design in compliance with environmental is-sues.” Life cycle analysis, however, is again a resource intensive toolbecause it requires the use of formal measurement instruments tocollect the necessary data and investments in training to build upthe competencies to effectively use the tool. Again, it seems ques-tionable if SMEs will be capable to use the tool widely (e.g.González et al., 2002; Lefebvre et al., 2001) even though it isadequate to support decisionmaking in terms of whichmaterials toreduce, replace, or use in product innovation. To enable SMEs withfew formalized procedures to use such a resource intensive toolsimplified versions are suggested (e.g. González et al., 2002).With afuzzy logic approach (fuzzy inference, certain degree of variabilityin the data, qualitative and quantitative variables) the need for in-depth environmental knowledge is lessened and there is leeway forsome uncertainty in the accuracy of the input data (González et al.,2002). Thereby, the applicability of the life-cycle analysis is facili-tated. Another tool which can support signaling at the product levelis (eco) labeling e also to achieve differentiation effects. This sub-theme of ecolabeling was also, but less frequently, discussed in oursamplewith regard to dividing products into certain environmentaland/or social categories (Blay-Palmer and Donald, 2006; Crals andVereeck, 2005; Visser, 2008).

Next to concepts and tools we also identifiedmore specific areasof innovation practice such as materials which in SMEs revolvedaround the issues reduction, replacement, and use of more sus-tainable materials (e.g. ecological materials). By managing the ma-terial side of the product SMEs may aim to reduce its pollutioneffects, increase its eco-efficiency, or optimize its resource charac-teristics to overall make a product easier to recycle, reuse, anddecompose (e.g. Chen, 2008a; Hitchens et al., 2003, 2005). More-over, through changing materials SMEs may develop entirely newproducts to secure competitive advantages by initially identifyingand replacing hazardous materials in existing products (e.g. DePalma and Dobes, 2010: 1815; Lee and Klassen, 2008: 577).Another aspect related to materials, but identified as a separatesubtheme, were issues related to packagingwhich included aspectssuch as reduced or reusable packaging for products (e.g. Bos-Brouwers, 2010; Hitchens et al., 2003; Fernandez et al., 2010; Nociand Verganti, 1999), efficient packaging systems to reduce costs(e.g. Blay-Palmer and Donald, 2006), or the use of biodegradablepackaging (e.g. Kearins et al., 2010). Fair-trade andorganic products interms of using rawmaterials fromorganic farming (e.g. Blay-Palmer



and Donald, 2006; Donald and Blay-Palmer, 2006; Hitchens et al.,2005), organic cotton (e.g. Kearins et al., 2010), or sourcing on thebasis of fair-trade (e.g. Rodgers, 2010)was also identified as a specificarea of innovation practice.We are aware that the latter innovationsroot in changes in the underlying production system and sourcingstrategies and thus could also be categorized as process or organi-zational innovation, however, we think that the product innovationaspect dominates. To redesign their products and comply with fair-trade standards, SMEs may benefit from integrating up-to-datetechnologies and implementing tools such as life cycle analysis(e.g. Lefebvre et al., 2003) to assess the environmental hazards andopportunities in (re)designing a product.

Overall, in a business-to-business environment, SOI on theproduct level enables SMEs to stay competitive as a supplier orsubcontractor, but also to better meet current and future environ-mental regulations (e.g. Biondi et al., 2002; González et al., 2002;Lefebvre et al., 2001; Michelsen and Fet, 2010; Noci and Verganti,1999; Pesonen, 2001; Suh et al., 2005). In a business-to-consumermarket SMEs can compete with radical product innovations (e.g.certified organic products) in niche markets and achieve competi-tive advantages through product differentiation by exploiting firmcharacteristics such as flexibility and their ability to respondquickly to changed market demands (e.g. Bianchi and Noci, 1998;Jenkins, 2009; Noci and Verganti, 1999). One important prerequi-site for environmental product innovation is to build up “green corecompetences” which was only touched upon in our sample (e.g.Chen, 2008a,b).

5.2.4. Interaction between product, process, and organizationalinnovations

The above analysis explored the details of how SMEs innovate atthe process, the product, or the organizational level. It alreadybecame visible that these levels show a considerable degree ofinteraction. Innovation efforts initially aimed at improving cleanerproduction, for instance, may lead to product innovations in asecond step. Therefore, this chapter will pay close attention as tohow the individual practices interact, which will allow us to answerour first research question more completely. Overall, we identified57 articles (see Table 6) that explicitly e although not exclusively e

dealt with multiple levels of innovation (e.g. Bianchi and Noci,1998; Biondi et al., 2002; Bos-Brouwers, 2010; Howgrave-Grahamand van Berkel, 2007; Jiménez, 2005).

Most commonly we were able to analyze an interaction betweenall three levels (e.g. Bos-Brouwers, 2010; Biondi et al., 2002;Hitchens et al., 2003; Jiménez, 2005). For example, van Berkel(2007: 689) argues cleaner production in firms is interrelated toproductivity, innovation, and sustainability because cleaner pro-duction is the initial avenue for further environmental and resourceconsiderations to deliver eco-efficient products and services.Thereby, SMEs derive benefits from the economic (direct cost

Table 6Innovation practices and their interaction.

Type of innovation (primary focus) Total

Single typeProduct 6Process 12Organizational 7

Multiple typesProcess and organizational 9Product and organizational 9Product and process 4Product, process, and organizational 36

Not specifieda 1Total no. articles 84

a Articles which did not meet at least one of the innovation type categories.


effects and long term viability of firm), environmental (reduceresource consumption and positively impact environment), andsocial sustainability (increase in quality of life) dimension. A casestudy by Larson (2000) illustrates how a single firm can re-designits innovation process through interacting with external actorswith effects on the product, process, and organizational level.

Based on a case study on green product innovation in SMEs Nociand Verganti (1999: 14) show that process and product innovationsinteract in that initial incremental changes at the manufacturinglevel to increase eco-efficiency, in the long-term should lead to arenewed perspective on the entire product life cycle (cradle-to-cradle principle). How the analysis of the eco-efficiency of thewhole production system, can lead to innovations in the productitself (e.g. replacing materials) is shown in a case study by Suh et al.(2005: 223) who explain that by identifying a central cost driver aseries of alternative processes for product characteristics can bedeveloped. Process innovations, such as cleaner production, canalso lead to improvements at the product level (e.g. Bos-Brouwers,2010; Michelsen and Fet, 2010) as the awareness for sustainabilitycharacteristics of a product is strengthened. This may even lead toaffect actors along an SME’s supply chain.

Process innovations also interact with organizational innovations(e.g. Christensen and Niels, 1996; Gurbuz et al., 2004; Hitchenset al., 2003) as they may complement each other and therebyimprove the environmental performance of firms. For instance,pursuing process innovations through cleaner production is facili-tated by those organizational innovations that are tools and man-agement systems because they help the organization to understandand measure its waste, discharges, and emissions. Through imple-menting cleaner production SMEs not only focus on improvementsat the level of material and energy flows but it also affects the firm’smanagement systems (e.g. Fresner, 1998: 178e179). EMS can belinked to process innovations (e.g. Biondi et al., 2002) to enhanceenvironmental performance, respond to supply chain pressures, orimprove communication (e.g. Lefebvre et al., 2001; Pesonen, 2001).

How an initial product innovation links to organizational inno-vation is shown in a case study by Parrish and Foxon (2005: 56)where they show how newmarketing and purchasing mechanismsalongside intense partnering with local communities (here nativetribes) were necessary to successfully diffuse renewable energy.Despite potentially low implementation rates and unsuitability ofconcept, EMS may prove a critical first step to product-orientedeco-innovation based on life-cycle assessments (e.g. Lefebvreet al., 2001). Further, Noci and Verganti (1999: 4) suggest a linkbetween EMS and radical product innovation to promote thecommitment of the firm to sustainability, for example, in terms offinancing. Similarly, certification processes can serve to promoteorganizational learning, initiate further process innovations, andsupport communication efforts (e.g. Pesonen, 2001).

Overall, it becomes clear that SOI requires a more integrativeapproach, that is, it translates as an interactive process between theproduct, process, and organizational level (see Table 7 for examples).

6. Discussion

Based on the previously presented literature review, we devel-oped an integrated framework that aggregates our results (Fig. 4)on innovation practices in terms of strategic sustainability behav-iors and types of SOIs.

6.1. An integrated framework on SOIs of SMEs

First, we argue that the heterogeneous SOI practices of SMEs canbe explained by an extended taxonomy of five different strategicsustainability behaviors as is summarized in Table 8.


Table 7Exemplary interactions between innovation types.

Influence of . On .

Process innovation Organizational innovation Product innovation

Process innovation Successful process innovations(e.g. energy-efficiency) canmotivate to engage in furtherprocess improvements

Initial process improvements (e.g. eco-efficiencypractices) may reveal benefits of a systematicenvironmental management system

Cleaner production can lead to eco-efficientproducts/services (van Berkel, 2007)Regional sourcing leads to co-developingproducts with regional suppliers

Organizationalinnovation

Environmental managementsystem can provide evaluationdata as preparation for processinnovations

Set-up of an environmental team may lead tofurther organizational modifications(e.g. employee training and development)

Environmental management system can bea (partial) basis for life-cycle assessmentsand improvements and thus product innovationSet-up of an environmental team facilitatesincorporation of employees in productdevelopment

Product innovation Offering more sustainable productsoften requires significantprocess changes (e.g. certifiedorganic products requireinputs from organic agriculture)

Introducing sustainable products may requirea more systematic management approach to thevalue chain both regarding production andsupply chain (e.g. environmental policy withprocurement guidelines; supplier selection,evaluation)

Successful introduction of an (pilot) eco-productmay lead to an entire eco-line or even rethinkingof conventional business

Sustainability-oriented innovation practices of SMEs

Strategic sustainability behavior Innovation types

Product

innovation

(e.g. eco-design, life-cycle

analysis, fair-trade products)

Process

innovation

(e.g. cleaner production,

eco-efficiency, logistics)

Time strategy to realize competitive advantageSecond mover advantagesPiecemeal innovationNo integrative approach

Proactive solutions to environmental/social issuesFirst mover advantages

Business model rooted in sustainabilityNew innovation principles (e.g. biomimicry)Strong interaction with external actors

Ignore environmental/social issues beyond compliance

Reactive

Innovation-based

Sustainability-rooted

Resistant

React to external stimuliFocus on efficiency

Anticipatory

New business

model

Initial external

stimulus to activate

Continuous external

stimulus to motivate

Capacity building for SOI

Emergent

strategic behavior

Deliberate

strategy

Organizational

innovation

(e.g. EMS, supply chain

management, reflexive

innovation process)

More increm

entalM

ore radical

Drivers & barriers

Fig. 4. An integrated framework for SOI practices of SMEs.


Please cite this article in press as: Klewitz, J., Hansen, E.G., Sustainability-oriented innovation of SMEs: a systematic review, Journal of CleanerProduction (2013), http://dx.doi.org/10.1016/j.jclepro.2013.07.017

Table 8Extended taxonomy for strategic sustainability behaviors in SMEs.

Strategic behavior Profit function Goals Innovation types Interaction withexternal actors

Resistant Ignorance of environmental/social factors Compliance ./. ./.Reactive Environmental/social factors cause costs Compliance and limited action beyond Process improvements Very lowAnticipatory Consideration of environmental/social factors

can reduce costsAhead of compliance and tangiblecost reductions

Incremental process andorganizationalinnovations

Low

Innovation-based Consideration of environmental/social factorscontribute to market success

Differentiation Incremental process,organizational,and incremental(limited radical) productinnovations

Medium

Sustainability-rooted Integration of economic, environmental, andsocial aspects define core business

Market transformation Radical product, process,and organizationalinnovations (businessmodel innovation)

High

1based on strategy literature analyzed in sample (see Section 5.1.1).


Resistant SMEs ignore sustainability or environmental-relatedpressures (cf. Tilley, 1999) and expectations whereas reactiveSMEs respond to external stimuli, for example, governmentalregulation or external stakeholder pressures (Noci and Verganti,1999). They are limited to complying with regulations as theconsideration of environmental or social issues is seen as anadditional cost. Their interaction with external actors will belimited and overall for SMEs with (resistant and) reactive strategicsustainability behavior incremental innovations at the process levelare to be expected based on limited eco-efficiency measures orminor changes in products and organizational routines.

Anticipatory SMEs time their innovation strategies to anticipatefuture innovation opportunities (Noci and Verganti, 1999). Theyconsider environmental and social issues to reduce costs andattempt to stay ahead of regulations. They are further characterizedby a low interaction with external actors and incremental processand organizational innovations can be expected. For anticipatorytype SMEs a comprehensive remodeling of core business processesand structures in line with sustainability principles remains achallenge as these SMEs fail to develop the SOI capabilities in thelong term. To introduce radically new processes, organizationalforms, and products often requires entirely new business models(Boons and Lüdeke-Freund, 2012; Hansen et al., 2009;Paramanathan et al., 2004; Schaltegger et al., 2012).

Innovation-based SMEs proactively seek innovative solutions toenvironmental and social challenges (cf. Aragón-Correa et al., 2008;Noci and Verganti, 1999) to realize competitive advantages. Theconsideration of environmental and social issues can lead tomarketsuccess in the form of differentiation. Incremental process, orga-nizational, and incremental (limited radical) product innovationscan be expected. Their interaction with external actors isconsiderable.

A step further is taken by sustainability-rooted SMEs where thebusiness model builds on the triad of the environmental, social, andeconomic variable to contribute to the sustainable development ofmarkets and society by spreading SOIs in niche and mass markets(cf. Schaltegger, 2002; Tilley, 1999). Furthermore, these SMEs beginto change their innovation process for SOIs through biomimicry andinteraction with external actors. This strategic sustainabilitybehavior is more likely to lead to radical product, process, andorganizational innovations and their interaction with external ac-tors will be extensive. It may be argued that SMEs with innovation-based strategies and particularly sustainability-rooted SMEs willfind and develop more radical innovation paths for sustainability,also because they are willing to make long-term investments basedon their strategies. Sustainability-rooted SMEs may even


successfully unlock dominant technologies and institutionalstructures to effect change and transformation on an industry level(e.g. Parrish and Foxon, 2009).

With regard to strategy formation we propose that both delib-erate and emergent strategies exist (Mintzberg and Waters, 1985).Regarding deliberate strategies, the SME can consciously articulatea sustainability strategy which is then implemented and subse-quently reflected in related innovation outcomes (i.e. process,organizational, and product innovations). As we are analyzing SOIsof SMEs, it has to be considered that they can be strongly owner-manager driven and are furthermore characterized by fewformalized structures. Hence, deliberate strategies are usually notexplicitly articulated e they are ‘entrepreneurial strategies’ (ibid).Still, except for mission-driven (sustainable) entrepreneurs, clearintentions for sustainability and thus deliberate strategies often donot exist. When no clear intention regarding sustainability exists,the actual innovation outcomes (i.e. processes, organizationalforms, products) reflect the underlying sustainability strategy andcan thus be considered strategic (sustainability) behavior. It is forthis reason that we speak of strategic behavior in this paper (cf.Fig. 4). Of course, business practice often represents an interplaybetween deliberate and emergent strategies.

Furthermore, in our analysis we observed that in many cases theinnovation effort at one level (product, process, or organizational)leads also to changes on another level. For example, eco-design atthe product level requires local sourcing and production which canoverall result in securing supply chains. Hence, we argue that SOIsdo not occur in isolation but are rather characterized through a highlevel of simultaneity at the product, process, and organizationallevel (cf. Fig. 4). It is thus essential that SMEs are put into a positionto recognize these innovation potentials at all three levels as theystart to (re)-build their entire business model on the triad ofenvironmental, social, and economic variables.

6.2. Capacity building for SOIs as an interactive process

Second, we argue that innovation will occur at varying degreesalso due to different levels of innovative capacity in SMEs (skills,competencies, capabilities). To strengthen the innovative capacityfor SOIs, SMEs can remodel their innovation process to interactmore frequently with external actors, that is, engage in collabora-tion practices beyond the firm level. This we showed for the moreproactive strategic sustainability behaviors. Collaboration isrecognized as a key element for the transition toward sustainability(e.g. Lozano, 2007; Roome, 2012) and describes a high-level ofinteraction betweenmultiple actors that benefit from differences in



perspective, knowledge, resources, and problem solving ap-proaches (cf. Hartono and Holsapple, 2004; Lozano, 2007). Itfacilitates firms to identify sustainability issues (e.g. van Kleef andRoome, 2007), access new or complementary resources, enhancetheir problem solving capacity (e.g. Jenkins, 2009; Lozano, 2007;Roome, 2001), search for and seek legitimacy for innovations, orsecure and identify future markets (e.g. van Kleef and Roome,2007).

Linking this argument back to our analysis of SOI practices ofSMEs, we propose that different modes of interaction can affect thestrategic sustainability behavior and subsequently the SOI practicesof SMEs. Given their cardinal disposition to respond to externalstimuli, a continuous activation through external factors, forexample regulation, or actors, for instance in public private part-nerships (e.g. Hansen and Klewitz, 2012b), is feasible to furthermotivate the deployment of the strategic behavior of reactive SMEsto eventually move beyond cost reductions through SOIs. Asanticipatory SMEs are generallywilling to engage in SOIs continuouscapacity building can facilitate long term change and an overallincrease in innovative activity for sustainability. To take innovation-based SMEs up the ladder of proactivity toward more radical SOIs,changes in their business model and increased interaction withexternal actors are feasible means to generically deploy theirstrategic behavior beyond differentiation with SOIs. Sustainability-rooted SMEs are certainly not “the perfect” type and continuouscapacity building and engagement with external actors mayprove meaningful to affect change not only at the organizationalbut also at industry level, for instance, through co-innovation. Forsuch proactive strategic sustainability behaviors, interactionbecomes an avenue for learning and innovation at the process,organizational, product, and even systems or institutional level(Bertels, 2012). This may lead to more radical SOIs, because, novelideas, new information, and resources are exchanged in knowledgeflows that are more distant to the firm’s own environment (e.g.Boschma, 2005; Granovetter, 1983). Research on learning-actionnetworks (e.g. Clarke and Roome, 1999; Roome, 2001), forexample, shows that through collaboration links between multipleactors are developed that go beyond and complement organiza-tional learning and innovation. Hence, interaction for SOIs is anenabling mechanism which leads to learning and innovative ca-pacity building in SMEs that ultimately translates into innovation atthe product, process, and organizational level.

6.3. From eco- to sustainability-oriented innovation

Third, we argue that even though our sample was strong on eco-innovations followed by a more integrative approach to sustain-ability, this should not be misleading in the sense that SMEs, do notinnovate in the area of social sustainability. We would argue thatthis is not the case, as there is an extensive literature on more CSR-related (indirectly related to social innovation) practices in SMEs(e.g. Jenkins, 2004, 2009; Jamali et al., 2009; LePoutre and Heene,2006; Murillo and Lozano, 2009; Perrini, 2006; Tilley, 2000). Here,studies find practices in the area of community engagement oremployee development (e.g. EC, 2007a). This has also been partiallyshown in our sample, in that, SMEs pay considerable attention toemployee development, developing a corporate mission to engagein society, or taking community needs into account. However, thesepractices are often declared as good business sense rather thanspecific innovation behavior. Furthermore, the introduction ofmethods which primarily aim to improve the environmental per-formance of firms can also affect social sustainability, in terms ofincreasing the quality of life (van Berkel, 2007). For example, theproduction system behind organic products also leads to removal ofhealth threats in the entire value chain as well as, with regard to


farmers, to increased independence from capital-intense inputs (e.g.pesticides) and potential income improvements through greenpricepremiums. Thus, rather than SMEs not innovating extensively in thearea of social sustainability it may be more a matter of them using adifferent language. This is a common phenomenon when talkingabout sustainability in SMEs, which often do not use the termsestablished by research or used by larger firms, such as corporatesocial sustainability or corporate sustainability (cf. EC, 2007b). SMEssimply often speak a different language on SOI.

6.4. Future research

One central aim of a systematic literature review is to proposeissues for future research,whichwewill do in thepresent section. AsSOIs are complex in nature and are themselves a form of organiza-tional and social learning (Roome, 2012), more research intolearning processes for SOIs (e.g. Siebenhühner and Arnold, 2007)andcapacitybuilding is essential. In this line, researchcould focusonthe different capabilities at the firm level and competencies at theindividual management level. Furthermore, in our sample we dis-cussed a range of methods and tools for SOIs, e.g. life-cycle-analysisor EMS. We suggest that more research is necessary on how tostreamline theseoften resource intensiveandcomplexmethods intomore simplified versions to make them applicable for SMEs (cf.González et al., 2002; Scholl and Nisius, 1998). For instance, it couldbe studiedhowthequalitativemethodof “strategic LCA” (Anderssonet al., 1998) applies to SMEs and could thus spur eco-design.

Overall, it is recommended to move away from the focus onSMEs as reactive entities with disadvantageous characteristics suchas resource scarcity which is taken so often, and instead focus ontheir unique advantages in support of SOIs (e.g. Aragón-Correaet al., 2008). Maybe the key alley for future research is related totheir potential to innovate radically. It has to be noted that tradi-tionally SMEs concentrate on environmental process innovations(Gärdström and Norrthon, 1994), and process innovations are oftenconsidered as first steps towardmore radical innovations. However,the last decade of research has not revealed much evidence thatthis causality actually exists. The literature sample indicates that awide range of traditional SMEs are still mostly focused on har-vesting low hanging fruits by engaging primarily in incrementalinnovation (e.g. Bos-Brouwers, 2010; Klewitz et al., 2012).

To focus on more radical innovations, the concept of sustainableentrepreneurship (Hall et al., 2010; Hockerts and Wüstenhagen,2010; Schaltegger, 2002) particularly with a focus on entrepre-neurialfirms andnewventures is promising (e.g. Kearins et al., 2010;Plieth et al., 2012; Rodgers, 2010). Sustainable entrepreneurs create‘hybrid organizations’which are both ‘market-oriented andmission-centered’ (Boyd et al., 2009: 1; see alsoHoffman et al., 2010). Existingpractitioner communities such as the “B Corp” (http://www.bcorporation.net) aiming to redefine business in a more sustain-able manner (e.g. Ben & Jerrys) provide interesting case studymaterial.

While this seems to emphasize the creation of new ventures,also conventional SMEs can radically change by remodeling theirbusiness models. Business model innovation can enable conven-tional firms to radically change processes, products, and organiza-tional forms in order to more successfully integrate sustainabilityinto core business (e.g. Boons and Lüdeke-Freund, 2012;Schaltegger et al., 2012). In many cases, radical innovations canonly be achieved with business model innovation, such as in thecase of product service systems (Hansen et al., 2009). For instance,Interface Inc. introduced a carpet leasing offering linked to signif-icant environmental benefits, which radically changed the valueproposition, customer interface, financial logic, and infrastructure(Stubbs and Cocklin, 2008). In SMEs, such radical innovations often


http://www.bcorporation.net


5 * refers to the 84 articles included in the bibliographical and thematic analysis.


occur in cases of threats of organizational survival or succession tothe next generation in family businesses, both phenomena whichshould be further studied.

In our sample, we further find that literature on SOIs of SMEscould greatly benefit from a stronger theoretical debate. Forinstance, absorptive capacity should provide some insight (e.g.Cohen and Levinthal, 1989; Lane et al., 2006) on the process ofstrengthening the innovative capacity for SOIs of SMEs. Hansen andKlewitz (2012b), for instance, showhow public private partnershipssupport SMEs in building up absorptive capacity, ultimatelyenabling evolution of their strategic environmental behavior. As thediscussion on SOIs of SMEs often revolves around learning andknowledge as specific resources for innovation (cf. Aragón-Correaet al., 2008), the resource based view (e.g. Barney, 2001), the natu-ral resource based view (e.g. Hart, 1995), and the knowledge basedview of the firm (e.g. Grant, 1996) might be adequate theoreticallenses. In the context of learning, theories related to organizationallearning (e.g. Snell and Chak,1998) would also enrich the debate onchange processes at firm level, for instance, how methods such ascleaner production or eco-design lead to which types of learning(e.g. single ordouble loop learning) at theorganizational level (see inour sample Siebenhühner and Arnold, 2007). A theoretical lens ofinstitutional theory could provide additional insight into the broaddebate on drivers and barriers for SOIs and how organizationalbehavior is guided by the formation of institutions as is shown byHoffman (1999) in the area of corporate environmentalism.

Similarly, research in the area of sustainable entrepreneurship,provides insight into the interplay between SMEs with other eco-nomic actors for industrial transformation toward sustainability(Hockerts and Wüstenhagen, 2010). Large companies, for instance,can adopt the new and more radical sustainability strategies of theSMEs through acquisition to thereby engage more rapidly indisruptive change (Moore and Manring, 2009). Also, SMEs cannetwork with each other and compensate for resource shortagesthrough scaling effects and ‘multiplying’ (Hockerts andWüstenhagen, 2010). SMEs in the business-to-business contextare involved in broader supply chains and therein can exert influ-ence over or can be influenced by larger firms further downstreamoperating as buyers (ormarketers). Literature on sustainable supplychain management (e.g. Carter and Rogers, 2008; Gold et al., 2010;Seuring and Müller, 2008) and particularly “supply chain man-agement for sustainable products” (Seuring and Müller, 2008) isimportant in this endeavor.

Last but not least, future research could try amore differentiatedlook at SMEs, for example, into micro, small, and medium busi-nesses. Also, there should be a stronger differentiation of SMEsoperating in business-to-business vs. business-to-consumer mar-kets. These firms operate at different value chain positions, areunder different pressures, and have more or less varying degrees offreedom in innovation, particularly with regard to products. Thisfocus on business-to-business is particularly important for themore radical strategic behavior as represented by the literature onsustainable entrepreneurship, where articles are mostly limited tocase studies from business-to-consumer markets (e.g. food andbeverages, clothing).

7. Conclusion

In this paper, we conducted a systematic review of SOI practicesof SMEs in order to develop an integrated framework covering ataxonomy of strategic sustainability behaviors linked to differentinnovation outcomes. By analyzing interdisciplinary literature fromdiverse fields as broad as environmental and sustainability man-agement, innovation management, and SME research, the frame-work allows integrating the previously scattered knowledge and


we can explain contingencies through an extended taxonomy ofstrategic sustainability behaviors.

However, the present paper is limited in various ways. First,with our focus on academic journal papers in English, we are awareof excluding papers in other languages as well as other types ofpublications. With this we also exclude the broad literature on eco-innovation in SMEs extensively dealt with in publications by in-ternational organizations which in future research would providevaluable insights on for instance policy schemes, environmentalprograms or initiatives, and best-practice examples (e.g. by theOECD, European Commission, United Nations Industrial Develop-ment Organization, or the United Nations Environment Pro-gramme). Second, due to the keyword-based identification ofpublications, it is possible that publications matching the researchfocus have not been found, because they do not contain requiredkeywords in the title or abstract of the paper.

Overall, our analysis is a qualitative interpretation of SOI prac-tices of SMEs providing an aggregated overview of the researchagenda development from 1987 until 2010 and thus allowing us tosystematically identifying future research avenues.

Acknowledgments

We are greatly indebted to the three anonymous reviewers fromthe Journal of Cleaner Production and the valuable commentsmadeby Donald Huisingh and Frank Boons which guided us to substan-tially improve the paper in its progress of finalization. Many thanksare directed to two anonymous reviewers who evaluated the paperand the helpful feedback we received on this paper from presentingit at the XXII International Society for Professional InnovationManagement (ISPIM) conference in 2010 (Hamburg, Germany).Moreover, we would like to acknowledge the insightful feedbackgiven by Stefan Schaltegger in preparation of this article.

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*van der Vlist, A., Holmer, H., 2009. Environmental technology and management inDutch horticulture. Int. J. Environ. Technol. Manag. 11, 207e217.

*van Hemel, C., Cramer, J., 2002. Barriers and stimuli for eco-design in SMEs.J. Clean. Prod. 10, 439e453.

*Visser, R., Jongen, M., Zwetsloot, G., 2008. Business-driven innovations towardsmore sustainable chemical products. J. Clean. Prod. 16, 85e94.

World Business Council for Sustainable Development (WBCSD), 2000. Eco-Effi-ciency: Creating More Value with Less Impact. WBCSD, Geneva.

Wagner, M., 2008. Sustainability-related Innovation and Sustainability Manage-ment. A Quantitative Analysis. Working Paper.

Walker, B., Redmond, J., Sheridan, L., Wang, C., Goeft, U., 2008. Small and MediumEnterprises and The Environment: Barriers, Drivers, Innovation and Best Prac-tice. A Review of the Literature. Working Paper.

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*Zackrisson, M., Rocha, C., Christiansen, K., Jarnehammar, A., 2008. Stepwise environ-mental product declarations: ten SME case studies. J. Clean. Prod. 16, 1872e1886.

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Further reading

*Lee, S., 2008. Drivers for the participation of small and medium-sized suppliers ingreen supply chain initiatives. Supply Chain Manag. eInt. J. 13, 185e198.

*Lin, C., Ho, Y., 2010. The influences of environmental uncertainty on corporategreen behavior: an empirical study with small and medium-sized enterprises.Soc. Behav. Personal 38, 691e696.

*Ronningen,M., 2010. Innovativeprocesses in anature-based tourismcase: the roleofa tour-operator as the driver of innovation. Scand. J. Hosp. Tourism 10, 190e206.

*Rothenberg, S., Becker, M., 2004. Technical assistance programs and the diffusionof environmental technologies in the printing industry: the case of SMEs. Bus.Soc. 43, 366e397.

*van der Vlist, A., Withagen, C., Folmer, H., 2007. Technical efficiency under alter-native environmental regulatory regimes: the case of Dutch horticulture. Ecol.Econ. 63, 165e173.

*Walker, H., Preuss, L., 2008. Fostering sustainability through sourcing from smallbusinesses: public sector perspectives. J. Clean. Prod. 16, 1600e1609.
























































































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Journal of Cleaner Production - pmir.it e Hansen (2014).pdf · cleaner production) and sustainability-oriented innovations (SOIs), that is, the integration of ecological and social