Environmental Management Systems and Environmental Product Innovation: The Role of Stakeholder Engagement

Abstract

Environmental product innovation (EPI) is an imperative for contemporary business as it enhances firm competitiveness and provides significant societal benefits. Arguments that the use of environmental management systems (EMS) — such as ISO 14001 — may enhance EPI have not been empirically supported. In this study, we argue that the EMS-EPI relationship is contingent upon the level of a firm’s engagement with various types of stakeholders, namely suppliers, customers, and the local community. Using a sample of 1,303 manufacturing firms for the period 2003-2014 we find empirical evidence that supports our hypothesis for all three types of stakeholders. Further analysis reveals that for firms with prior experience with quality management systems, engagement with local communities is the most beneficial. We discuss the implications of these results for both theory and practice.

Keywords: Environmental Product Innovation; Environmental Management Systems; ISO14001; Stakeholder Engagement; Quality Management Systems

JEL Classification: C22; L6; Q01; Q55