Firms and their supply chain partners increasingly confront environmental challenges ranging from water pollution to landfill waste to climate change. In addition, they are experiencing greater pressure from customers and regulatory bodies to make sustainable products in environmentally friendly ways. Environmental innovations – new or modified processes, practices, systems, and products that reduce or completely avoid harm to the natural environment – provide new avenues for addressing these challenges. Such innovations, however, require the efforts of many firms in the dynamic and interconnected world of supply chains. Therefore, it is important to understand how these environmental innovations originate in and diffuse throughout supply networks.
Using a complex adaptive systems (CAS) view, longitudinal case studies of Hyundai and Samsung SDI, and an abductive research approach, my co-authors and I developed a multilevel process model and a set of theoretical propositions about how environmental innovations emerge within dominant buying firms and spread throughout their supply networks over time. Our model and corresponding propositions address an environmental innovation’s firm-level origins rooted in sensing, intuiting, interpreting and structuring processes, and its network-level dynamics, which feature diffusing, amplifying, organizing and synchronizing processes. Consistent with a CAS view, our main insight is that the process of environmental innovation in supply networks is an emergent phenomenon. That is, once the dominant buying firm’s internal processes of emergence play out and its eco-innovation spreads to the broader supply network, the innovating firm loses its ability to fully control the innovation. Consequently, self-organization and decentralized coordination take over. The process model is presented in the figure below.
Our proposed model has important implications for theory and practice. A refined understanding of environmental innovations in supply networks sets the foundation for future theoretical work on supply network dynamics. Our process model and theoretical propositions provide insights into how environmental innovations originate and evolve in supply networks. The model lays the groundwork for examining innovation-oriented supply chain dynamics. By considering both firm and network level dynamics, our study presents implications for multi-level theorizing in the area of sustainable supply chain management. Following complex adaptive systems perspective, we emphasize the role of small perturbations in setting forth positive set of consequences in the supply chain. Instead of trying to develop an exact future state of capabilities in a firm or a supply network, our study presents directions for developing dynamic operational capabilities by focusing on behavioral patterns and routines. We promote the idea of achieving a balance between control and emergence while managing environmental innovations in supply networks. Our results suggest deliberate planning when environmental innovation process is still within the boundaries of the dominant firm, however, this should be followed by an indirect engagement with suppliers once the process unfolds in the larger network. We emphasize that the eight-phase pattern identified in the paper calls for a general mental model of the underlying complexity and dynamism within supply networks. In conclusion, our study offers practical guidance for organizations seeking to build sustainable supply chains and provides a foundation for future theoretical work in the area of environmental innovations.
Source: Nair, A., Yan, T., Ro, Y. K., Oke, A., Chiles, T. H., Lee, S-Y. 2016. “How Environmental Innovations Emerge and Proliferate in Supply Networks: A Complex Adaptive Systems Perspective.” Journal of Supply Chain Management, Volume 52, Issue 2, (Forthcoming).