Customer orientation and green product innovation - the mediating role of entrepreneurial orientation

Abstract

Research has shown that many external factors drive green innovation.Yet, internal cultures and capabilities within a company that impact the development of green products remain less well understood. Additionally, it has often been taken for granted that various environments lead to new product innovation per se,while the mediating role of capabilities has widely been ignored. Hence, this study focuses on a customer-oriented company culture and the three main entrepreneurial orientation dimensions–innovativeness, proactiveness, and risk-taking–of top management teams. Findings indicate that a top management team’s innovativeness and risk-taking are positively mediating the effect of a customer-oriented culture on green product innovation. The study shows that this culture fosters the dynamic capabilities innovativeness and risk-taking to respond to customer expectations. Drawing on the upper echelon theory, these capabilities, in turn, have a direct impact on the development of green products. In contrast, customer orientation has a negative effect on a proactive mindset, indicating that a culture with a strong customer focus hinders top managers to be proactive and ahead of competitors with breakthrough products. These results are based on a multiple regression analysis with an underlying sample of 684 observations of publicly listed companies within the construction industry. All data points are gathered through the analysis of letters to shareholders within annual reports and the Thomson Reuters’ ASSET4 database.