What drives eco-innovation? A review of an emerging literature

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What drives eco-innovation? A review of an emerging literature Jana Hojnik ∗ , Mitja Ruzzier Faculty of Management, University of Primorska, Cankarjeva 5, 6000 Koper, Slovenia

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Article history: Received 10 November 2014 Received in revised form 28 September 2015 Accepted 29 September 2015 Available online xxx Keywords: Eco-innovation Environmental innovation Innovation drivers R&D Adoption Diffusion

a b s t r a c t This paper provides an overview of the emerging literature on the drivers of eco-innovation. Its main contribution lies in separating the drivers associated with the phases of development and diffusion and in identifying particular drivers based on different eco-innovation types. We find that research in this area primarily adopts the resource-based and institutional theories as its theoretical foundations and that the prevailing effects identified are those of regulations and market pull factors. Moreover, product eco-innovation, process eco-innovation, organizational eco-innovation, and environmental R&D investments seem to be driven by common drivers, such as regulations, market pull factors, EMS, and cost savings, as well as to be positively associated with company size. The majority of the studies in our literature review employ a quantitative research methodology and focus on the diffusion stage of eco-innovation. We end with providing a synthesis of drivers of companies’ eco-innovation and directions for future research. © 2015 Elsevier B.V. All rights reserved.

1. Introduction In recent years, the theme of eco-innovation has received increasing attention in academic research and policy circles. Ecoinnovations are a subset of, and share many characteristics with, innovations in the economy (Wagner, 2008). However, ecoinnovations also have unique, distinguishing features that suggest a need for particular management and policy approaches to foster them. To better understand how firm management and public policy can accelerate and direct eco-innovations, insight is needed into the drivers of the development (R&D) and diffusion (widespread adoption) of eco-innovations. In our study, a driver refers to a stimulus of eco-innovation, which can act as a motivation-based factor (e.g., regulatory pressure, expected benefits of implementation, profiling of company as environmentally friendly, competitive pressure, customer demand) or a facilitating factor (e.g., EMS, financial resources, technological capabilities).1 This paper reviews the academic literature on eco-innovation drivers and identifies their theoretical foundations, as well as the unique and typical characteristics of eco-innovation. Only a few studies (Del Río González, 2009; Pereira and Vence, 2012) provide a comprehensive literature review on eco-innovation drivers. The current review adds value in four ways. First, it offers a more complete literature overview than previous studies by including 155 articles, thus covering a broader and wider range of both quantitative and qualitative studies. Second, it considers the various eco-innovation types, such as product, process, technological, and organizational eco-innovations and green patents. Third, it addresses drivers in both

∗ Corresponding author. E-mail addresses: [email protected], [email protected] (J. Hojnik), [email protected] (M. Ruzzier). 1 We thank an anonymous reviewer for bringing our attention to this point. http://dx.doi.org/10.1016/j.eist.2015.09.006 2210-4224/© 2015 Elsevier B.V. All rights reserved.

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the development and diffusion phases of eco-innovation. Finally, it provides a synthesis of the findings, identifies research gaps, and provides suggestions for future research. The remainder of this paper is structured as follows. Section 2 defines eco-innovation, discusses terms used to address it, and emphasizes its main peculiarities. Section 3 presents the research methodology. Section 4 reviews the literature on eco-innovation drivers by illustrating the theoretical backgrounds used to test eco-innovation drivers and delineating the factors that trigger eco-innovation, focusing on different eco-innovation types and stages of eco-innovation (innovation/development and adoption/diffusion). Finally, Section 5 summarizes the study’s findings and offers limitations and further research directions.

2. Eco-innovation: definition and peculiarities Defining eco-innovation is not a simple task, as the various research studies do not agree on a common definition. The Eco-Innovation Observatory (2012, p. 8) defines eco-innovation as the “introduction of any new or significantly improved product (good or service), process, organizational change or marketing solution that reduces the use of natural resources (including materials, energy, water and land) and decreases the release of harmful substances across the whole life-cycle.” In the Measuring Eco-Innovation project, Kemp and Pearson (2007, p. 16) defined eco-innovation as the “production, application or exploitation of a good, service, production process, organizational structure, or management or business method that is novel to the firm or user and which results, throughout its lifecycle, in a reduction of environmental risk, pollution and the negative impacts of resources use (including energy use) compared to relevant alternatives.” According to Horbach et al. (2012, p. 119), eco-innovations are “product, process, marketing, and organizational innovations, leading to a noticeable reduction in environmental burdens. Positive environmental effects can be explicit goals or side effects of innovations. They can occur within the respective companies or through customer use of products or services.” Several other definitions exist (see Carrillo-Hermosilla et al., 2010). However, despite differences in wording, all definitions embrace the environmental component and reflect the two main consequences of eco-innovation: fewer adverse effects on the environment and more efficient use of resources. However, while eco-innovation can be realized in many forms (e.g., product, process, and organizational and/or marketing methods), the effect of a diminishing environmental burden is not the primary reason for the deployment of eco-innovation. Ambiguity also exists regarding the term with which to label this concept; throughout the literature review, researchers use the terms eco-innovation, green innovation, environmental innovation, and sustainable innovation interchangeably. However, it should be noted that the first three of these terms embrace ecological and environmental dimensions, while sustainable innovation addresses a broader concept and embraces an additional social dimension (Charter and Clark, 2007; Schiederig et al., 2012). In their literature review, Angelo et al. (2012) discovered that the term environmental innovation is used in the majority of reviewed papers (65%), followed by the terms eco-innovation (22%) and green innovation (only 13%). This discussion raises the following question: Should eco-innovation be distinguished from other innovations, and, if so, why? Rennings (2000) exposed three specific peculiarities of eco-innovation. First, eco-innovation can be technological, organizational, social, or institutional; it can be developed by companies or nonprofit organizations; and it can be traded or not traded on markets. The second peculiarity, which leads to the third, is that an interdisciplinary approach should be adopted when analyzing eco-innovation because of its placement between the disciplines of innovation economics and environmental economics (Rennings, 2000). This leads to the so-called “double externality problem,” which emphasizes the crucial role of environmental policy instruments as drivers of eco-innovation. Positive externalities are produced by eco-innovation (Rennings, 2000), including the usual knowledge externalities in the research and innovation phases as well as the environmental externalities in the adoption and diffusion phases, leading to the social desirability of eco-innovations (Belin et al., 2009). While significant common knowledge spillovers exist for eco-innovation (as for innovation in general), environmental spillovers are also produced; society benefits from eco-innovation, while companies bear the costs to comply with regulations and reduce their environmental burden (Rennings, 2000; Rennings et al., 2006). Therefore, companies investing in eco-innovation bear higher costs than their polluting competitors, and the positive externalities work as a disincentive for them (Rennings et al., 2006). For this reason, technology push factors and market pull factors steer companies toward the deployment of general innovation, while regulatory push/pull effects should also be considered for spurring ecoinnovation (Beise and Rennings, 2005; De Marchi, 2012; Horbach, 2008; Porter and van der Linde, 1995; Rennings, 2000; Schmidt et al., 2010; Van den Bergh et al., 2011; Wagner, 2008).

3. Research approach This paper employs the literature review method used by several previous researchers (e.g., Angelo et al., 2012; Del Río González, 2009; De Medeiros et al., 2014; Holtbrügge and Dögl, 2012; Karakaya et al., 2014; Klewitz and Hansen, 2014; Pereira and Vence, 2012) to identify drivers of eco-innovation and consolidate published research on the topic. Our literature review included two main phases. The selection phase consisted of gathering a comprehensive set of publications in the desired areas, while the analysis phase consisted of a careful and critical examination of the publications to identify patterns and recurrent themes.

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3.1. Selection of articles First, we identified the aim of the literature review: to identify factors that drive eco-innovation, with special emphasis on different types and stages of eco-innovation (innovation/development, adoption/diffusion). To provide a broad overview and evaluation of published research, we consulted all journal articles, as well as project, working, and discussion papers, published in Science Direct. We went beyond top-tier journals and those oriented mostly toward environmental science or environmental economics, also including specific journals that are highly relevant to our review topic (e.g., Research Policy), as well as marketing journals that pay notable attention to the phenomenon of marketing eco-innovation (e.g., Journal of International Marketing) and many others focusing on entrepreneurship, tourism, international business, and management topics that deliver scientific knowledge and value to our chosen topic. However, we did not include books or book chapters, as we could not cover all of them and did not have full access to the contents. For the selection step, we used the following method. First, we conducted a keyword search for articles that contained both (1) “determinants,” “drivers,” or “antecedents,” and (2) “eco-innovation,” “ecological innovation,” “green innovation,” or “environmental innovation.” We used “eco-innovation,” “ecological innovation,” “green innovation,” and “environmental innovation” interchangeably, as other researchers have done (Charter and Clark, 2007; Angelo et al., 2012; Schiederig et al., 2012; Karakaya et al., 2014). Next, we read the full articles to assess whether eco-innovation and its drivers were their central subjects. If this criterion was not satisfied for a given article, that article was not maintained for the final review analysis. Inclusion criteria for each paper were as follows: (1) includes or explores the drivers of eco-innovation, (2) focuses on eco-innovations and not on innovations in general or solely on drivers of environmental managements systems (EMS) (e.g., ISO14001, EMAS, or Total Quality Environmental Management Systems (TQEM)), (3) focuses on development/innovation or adoption/diffusion of ecoinnovation at the firm level, and (4) was published between 2000 and the time of our review. This procedure identified the first dataset of 1185 articles (extraction date: 10 March 2014, repeated on 15 July 2014). The same procedure (with expanded keywords) was then used again (extraction date: 9 October 2014); resulting in a total of 1337 articles. We began the review with only articles/papers in Science Direct; however; in the final step; we also included articles/papers published in Wiley and Blackwell. We then further expanded the search (extraction date: 7 January 2015) to cover articles/papers and journals that were not published in Science Direct and were published before 2000; resulting in a total of 1412 articles/papers. After all articles/papers published on this topic were collected, two researchers independently analyzed the whole sample to select only those whose research questions and results were directly related to drivers of eco-innovation, thus narrowing the pool to 155 articles. All research streams were included, from the fields of environmental science and economics to those of marketing and management. This set of publications was then critically appraised and evaluated by the researchers, with a focus on identifying factors that positively affect eco-innovation in companies. Finally, for the data synthesis stage, an aggregative approach was employed to summarize the findings of the reviewed studies. Table 1 provides a breakdown of the retained articles. Of the 155 articles, only 20 are conceptual; the remaining 135 are empirical. Moreover, more than half of the analyzed articles (90) were published in environmental science or environmental management journals. 4. Overview of research on drivers of eco-innovation This section presents the results from the literature and synthesized findings in 4 subsections. We discuss the theoretical backgrounds related to the examination of eco-innovation drivers (Section 4.1), rank drivers of all eco-innovation types together by the frequency with which they appeared in the encompassed studies (Section 4.2), identify drivers of different eco-innovation types (Section 4.3), and provide a synthesis of the drivers in the development/innovation and adoption/diffusion stages of eco-innovation (Section 4.4). 4.1. Theoretical background regarding the drivers of eco-innovation After highlighting the peculiarities of eco-innovation, the reviewed researchers recognized that the general innovation theory is not the most appropriate theoretical background on which to explore the drivers of eco-innovation; instead, a different theoretical underpinning should be adopted. The drivers of eco-innovation are, therefore, distinguished from the drivers of innovation in general. The following paragraphs summarize the theoretical backgrounds on which researchers tested the drivers of eco-innovation. The encompassed studies typically adopted general innovation theory, which includes factors of technology push (important in the product development phase) and market (or demand) pull (important in the diffusion phase) (De Marchi, 2012; Rehfeld et al., 2007). Numerous research studies focusing on eco-innovation have also considered regulatory and institutional frameworks (De Marchi, 2012; Horbach, 2008; Porter and van der Linde, 1995; Rennings, 2000). Rennings (2000) emphasized the role of regulatory push/pull drivers for eco-innovation, deriving from a distinct eco-innovation feature called the “double externality problem.” In addition, Horbach (2008) enlarged the general innovation theory and proposed the term environmental innovation theory, encompassing demand side, supply side, institutional, and political influence drivers of eco-innovation. Other researchers (Horbach et al., 2012; Triguero et al., 2013) also adopted this theoretical background in their exploration of eco-innovation drivers. Please cite this article in press as: Hojnik, J., Ruzzier, M., What drives eco-innovation? A review of an emerging literature. Environ. Innovation Soc. Transitions (2015), http://dx.doi.org/10.1016/j.eist.2015.09.006

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Table 1 Overview of analyzed articles by journal and type/research nature of article (2000-present). Journal

Conceptual article

Journal of Cleaner Production Ecological Economics Research Policy Business Strategy and the Environment Journal of Environmental Economics and Management Technological Forecasting and Social Change Energy Policy European Journal of Innovation Management International Journal of Production Economics Journal of Business Research Journal of Purchasing and Supply Management Resource and Energy Economics Discussion papers Environmental Innovation and Societal Transitions European Economic Review European Environment Journal of Business Ethics Journal of Engineering and Technology Management Journal of World Business Omega Procedia – Social and Behavioral Sciences Project papers R&D Management Resources, Conservation and Recycling Tourism Management Transportation Research Part E: Logistics and Transportation Review Working paper Academy of Management Journal African Journal of Business Management Annals of Tourism Research Cahiers du GREThA Corporate Social Responsibility and Environmental Management Cuadernos de Gestión Energy Economics Environmental Science & Policy Environmental and Resource Economics European Management Journal Harvard Environmental Law Review Industrial Marketing Management International Journal of Business Studies International Journal of Environmental Technology and Management Journal of Business Venturing Journal of Environmental Management Journal of International Marketing Journal of Marketing Journal of Operations Management Policy Sciences Technovation The Journal of High Technology Management Research The Review of Economics and Statistics VSE: Vie & Sciences de l’Entreprise Total

3 3

1 2 1

1 1

Empirical article 28 15 12 10 5 4 2 3 3 3 3 3 2 1 1 2 2 2 2 2 2

2 2 2 2 2 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 20

135

Total 31 18 12 10 6 6 3 3 3 3 3 3 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 155

The drivers of eco-innovation are also based on other theoretical backgrounds. Yarahmadi and Higgins (2012) proposed a mixture of institutional theory and resource-based theory. Institutional theory (used by Li, 2014; Lin and Sheu, 2012; Zhu et al., 2010, 2012) argues that, if organizations want to ensure their legitimacy, survival, and access to resources, they have to conform and consequently comply with regulations and rules (Al-Twaijry Abdulrahman et al., 2003). By satisfying their stakeholders, companies can increase their ability to survive and grow in a competitive environment (Li, 2014). Moreover, they tend to implement green practices to satisfy and maintain the financial support of their stakeholders (Govindan et al., 2014). In contrast, resource-based theory (used by Chen, 2008; Leonidou et al., 2013) suggests that, in order to sustain competitive advantage (Barney, 1991), a company’s resources need to be valuable, rare, imperfectly imitable, and non-substitutable. These resources encompass human resources, knowledge resources, information technology, and capital and can be divided into intangible resources (knowledge and intellectual property) and tangible resources (assets and equipment) (Sarkis et al., 2010). To test drivers of eco-innovation, many researchers have used some combination of the two aforementioned distinct but complementary theories (Aschhoff and Sofka, 2009; Bansal and Roth, 2000; Doran and Ryan, 2012; Kammerer, 2009; Please cite this article in press as: Hojnik, J., Ruzzier, M., What drives eco-innovation? A review of an emerging literature. Environ. Innovation Soc. Transitions (2015), http://dx.doi.org/10.1016/j.eist.2015.09.006

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Kesidou and Demirel, 2012; Lin et al., 2013; Pereira and Vence, 2012; Qi et al., 2010; Tatoglu et al., 2013; Weng and Lin, 2011). Moreover, numerous studies (Li, 2014; Lin and Sheu, 2012; Zhu et al., 2012; Zhu et al., 2013) apply institutional and neoinstitutional theory. Neo-institutional theory suggests that homogeneity and the reproduction of organizational behaviors appear through three institutional isomorphisms (Spence et al., 2010; Zhu et al., 2010). First, coercive pressures (related to the “regulative pillar,” or regulations imposed by institutions) occur through those who are in power (e.g., government agencies); therefore, Zhu et al. (2010) also considered environmental regulations to be coercive pressures. Second, mimetic pressures (related to the imitation of business leaders) occur when companies follow industry competitors by mimicking their successful actions. Finally, normative pressure (associated with the adoption of accreditations or certifications) are typically exerted by internal or external stakeholders. Furthermore, Zhu et al. (2010) argued that all institutional pressures have the potential and the capacity to influence an organization’s responsiveness to environmental issues. Later, Zhu et al. (2012) indicated that international institutional pressures are significantly associated with proactive environmental practices, such as ISO14001, TQEM, and eco-auditing; moreover, their influence is greater than that of domestic institutional pressures. The stakeholder theory is also frequently used as a theoretical underpinning for the research on eco-innovation drivers (Banerjee et al., 2003; Tang and Tang, 2012; Zutshi and Sohal, 2004), which emphasizes the role of stakeholders and their effect on a company’s adoption of eco-innovation (Oxborrow and Brindley, 2013; Tang and Tang, 2012). Sarkis et al. (2010) distinguished two groups of stakeholders: internal stakeholders (employees and managers) and external stakeholders (customers, government regulators, shareholders (financial investors in the companies) and society, mostly non-governmental organizations (NGOs)). In contrast, Nair and Ndubisi (2011) suggested three groups of stakeholders: core influencers (management/leadership, employees, consumers, government, and active general public), intermediate influencers (NGOs, competitors, and business partners), and moderate influencers (media, financial community, court/legal system, and the scientific community). Stakeholders exert pressure on companies with the aim of reducing adverse or enhancing positive environmental impacts (Sarkis et al., 2010); therefore, better or improved environmental performance can improve relations between the company and its external stakeholders (Ambec and Lanoie, 2008). Moreover, drivers of eco-innovation can also be categorized as internal or external (Agan et al., 2013; Del Río González, 2009; Gadenne et al., 2009; Horbach, 2008; Horbach et al., 2012; Lewis and Cassells, 2010; Sharma, 2001; Testa and Iraldo, 2010; Van Hemel and Cramer, 2002; Walker et al., 2008; Yen and Yen, 2012). Del Río (2009, p. 863) pointed out that internal factors overwhelmingly refer to the existence of internal preconditions and features of the company, which facilitate the company’s involvement in environmental technological change. Thereby, environmental management systems (EMS) have the potential to represent important capabilities internal to the company, which facilitate the continuous generation/adoption of eco-innovation (Wagner, 2007). Meanwhile, external factors stem from the incentives and stimulus derived from a wide range of actors and factors that exert pressures to which companies respond; external drivers thus represent interaction with other institutional, market, and social actors (Del Río González, 2009). In sum, we can find many similarities among the aforementioned theoretical backgrounds for exploring eco-innovation drivers. When separated from theory, these drivers are essentially the same, mostly focusing on regulations, customer demand, competitors, expected benefits, and general characteristics of the company (firm size and firm age, also related to human, financial, green, and physical resources). However, we can conclude that all of these drivers can derive from or result in enlarged general innovation theory (called environmental innovation theory), resource-based theory, institutional theory, or stakeholder theory, depending on the bundle of factors and type of eco-innovation that we aim to address. When exploring drivers of environmental management practices, we will most likely undertake an institutional theory as others have done. Similarities can be found among different theories; for instance, regulations are associated with coercive pressures in institutional theory, external stakeholders in stakeholder, and institutional and political influences in environmental innovation theory. Similarly, customers are associated with market pull factors in general innovation theory and environmental innovation theory, external stakeholders in stakeholder theory and normative pressures in the institutional theory. Therefore, the selection of the theory that will underpin our research largely depends on the type of eco-innovation and selection of drivers that we aim to test. Based on the literature review, we can conclude that past research mostly examined the proximate factors of eco-innovation adoption (i.e., the causes that immediately lead to the adoption or development of eco-innovation), whereas insufficient emphasis and attention have been given to the distal factors,2 which could result in greater insight into the implementation or development of eco-innovation, thus shedding light on the real reasons (which are usually less obvious and more distal to the event) for eco-innovation adoption or development. According to the Oslo Manual (2005), the ultimate reason that companies innovate is to improve firm performance, which can be achieved through increasing demand (product differentiation, new products or processes, which can represent a source of market advantage) or reducing costs by implementing more efficient (productivity-enhancing) process eco-innovations. Therefore, it would be beneficial for future research to broaden the scope of analysis in terms of the variables included and, moreover, to include distal factors in the analysis.

2

We thank an anonymous reviewer for this remark.

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4.2. Factors triggering eco-innovation When exploring drivers of eco-innovation and focusing on all encompassed prior work, our synthesized findings indicate that regulations constitute the most commonly and frequently reported triggering factor (found in 69 of the studied papers), followed by market pull factors (39 papers). Therefore, regulations and market pull factors seem to be the factors most frequently reported as drivers of eco-innovation. Other important but less frequently reported drivers were cost savings (18), firm size (17), technology push factors—research and development (R&D) (14), EMS (12), competition (12), managerial environmental concern (11), and stakeholders’ environmental pressure (11). Among the more frequently found drivers of eco-innovation were government subsidies/grants (10), followed by ISO14001 certification (9), new market creation, opportunities/increasing market share, and supply chain pressure (mentioned 8 times each). Other factors that play an important role in inducing eco-innovation are improvement of company image/reputation, gain of competitive advantage and environmental policy (7); collaboration with external partners, voluntary agreements, and public pressure (6); technological capabilities and taxes (5); cost pressure, potential revenue, top management support, past introduction of innovation, corporate social responsibility, and supplier involvement (4). Pertaining to Horbach’s (2008) finding that “innovation breeds innovation,” which implies that companies that have been innovative in the past are more likely to innovate in the present, we found support in some other works included in our study (De Marchi, 2012; Mondéjar-Jiménez et al., 2015; Rothenberg and Zyglidopoulos, 2007). Additionally, companies that have already introduced new products or processes in the past are also more prone to introduce environmental than other types of innovation (De Marchi, 2012, p. 621) and more likely to adopt a greater number of environmental innovations (Rothenberg and Zyglidopoulos, 2007). Among the less relevant drivers of eco-innovation (reported 2 or 3 times each) are economic incentive instrument, supply-side factors, product design with life cycle analysis, expected increase of product quality, networking activities, employees, resources (physical, financial, and human), company efficiency/productivity, providing information to consumers and eco-labeling activities, intention to strengthen brand, industrial sector initiatives, company’s green capabilities, company performance, and company age. Finally, the least frequently reported factors for inducing eco-innovation (mentioned only once each) are technology-specific instruments, economic risk and uncertainty, market research on the potential of environmental innovation, shareholders’ pressure, NGOs, EMAS, TQEM, ISO9001 certification, and specific environmental organizational measures such as take-back systems for products and measures pertaining to waste disposal or redemption of own products.

4.3. Distinct drivers of different types of eco-innovation The second synthesized finding confirms that different factors trigger different eco-innovation types. The two drivers found to trigger product eco-innovation most frequently were market pull factors and regulations, while firm size, technology push (R&D), EMS (more specifically ISO14001), and the company’s green capabilities facilitate either development or implementation of product eco-innovation. Regulations and market pull factors were most often identified as drivers of eco-design, followed by cost reduction, brand value, new market opportunities/increase of market share, expected increase of product quality, environmental impact reduction, fashionableness, and industrial sector initiatives. The review indicates that process eco-innovations are driven mainly by regulations and EMS. Other frequently reported drivers of process eco-innovation are market pull factors, market research on the potential of these, and firm size. Moreover, the following drivers were identified to incite green manufacturing: regulations, financial benefit, customer pressure, and stakeholder pressure. Furthermore, eco-innovation in services depends on the following factors: EMS, cooperation, public funding, environmental policies, eco-tax policy, and training. Environmental technologies were found to be driven by regulations and improvement in corporate image, followed by policy measures, regulations (current and anticipated), domestic and foreign demand pull policies, cost savings, customer pressure, past environmental investments, ISO14001, TQEM, technological capability, R&D intensity, human and physical capital, personal commitment of managers, competitive pressure, firm performance, and facility age. Ashford et al. (1985) stressed that regulation design should combine an assessment of the innovative capacity of the possible responding industrial sectors with levels and forms of regulation tailored to that capacity. Moreover, for environmental protection, the integration of environmental policy and industry policy can be more efficient than traditional environmental policies (Carraro and Siniscalco, 1994). Another factor that can impede or stimulate environmental technology is economic risk and uncertainty (Norberg-Bohm, 1999); companies are likely to undertake technological eco-innovation in situations with clear short-term benefits, while such innovations are less likely when the payoff is more long-term or uncertain, unless the policy provides stronger political or economic incentives. Moreover, concerning economic risk and uncertainty, companies that face consistent demand from their customers for environmental products in the short and medium term might consider investing in cleaner technologies for the longer term (Montalvo, 2008). Environmental technologies can be divided into clean technologies (driven primarily by regulations, demand-pull factors, government subsidies, cost savings, and R&D intensity, as well as by organizational capabilities, technological opportunities and capabilities, taxes, voluntary agreements, economic risk and uncertainty, social pressure, general management systems, and competition) and end-of-pipeline technologies (driven primarily by regulations, as well as by stringency of environmental policies, equipment upgrade motives, price of energy and raw materials, firm size, and ISO14001). Please cite this article in press as: Hojnik, J., Ruzzier, M., What drives eco-innovation? A review of an emerging literature. Environ. Innovation Soc. Transitions (2015), http://dx.doi.org/10.1016/j.eist.2015.09.006

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Reviewed studies indicate that organizational eco-innovations are driven by regulations, supply-side factors, and new markets opportunities/increase of market share. More specifically, environmental strategy adoption depends largely on public pressure and managerial environmental concern, followed by regulations, competitive advantage, improvement of efficiency/productivity, shareholders, customers, employees, industry associations, media, financial institutions, NGOs, and corporate values. Additionally, coercive, normative, and mimetic pressures—primarily trigger green supply chain management practices, followed by gain of competitive advantage/differentiation, customer pressure, cost reduction, organizational support, and managerial environmental concern. Environmental management practices are driven most frequently by stakeholder pressure, customer pressure, supply chain pressure, and firm size, followed by regulations, competitive pressure, managerial environmental concern, and firm profitability. Moreover, green purchasing seems to be driven by customer pressure, environmental cooperation with suppliers, regulatory pressure, and top management commitment. Researchers have reported that shared vision, technology sensing/response capabilities, and physical and financial resources spur adoption of environmental marketing strategy. One of the last types of eco-innovation explored in the encompassed studies is patented inventions (i.e., environmental patent applications), which are triggered by the following factors: government subsidies, new market opportunities/increase of market share, international competitiveness, implementation level of EMS, stakeholder pressure, competition, environmental policies, R&D intensity, and firm size. Last, investments in environmental R&D are incited primarily by regulations, ISO14001 certification, expected cost savings, and company size, followed by policy stringency, expected opportunities, EMS, presence of TQM program, firms’ organizational capabilities, and market pull factors. 4.4. Eco-innovation drivers in the development/innovation and adoption/diffusion stages of eco-innovation The third finding concerns an exploration of studies on eco-innovation drivers in terms of whether they focus on the development/innovation stage or the adoption/diffusion stage of eco-innovation. The synthesized findings indicate that regulations drive eco-innovation in both stages. However, the findings of Kesidou and Demirel (2012) indicate that only the least and most innovative companies are driven by regulatory requirements. Interestingly, expected future regulations also seem to spur eco-innovation in both stages but were found mainly for product eco-innovation (Horbach et al., 2011, 2012) and environmental technologies (Khanna et al., 2009). Additionally, several researchers found that environmental policy triggers eco-innovation in the development/innovation stage, while others found that it exerts an effect in the adoption/diffusion stage. An important aspect of environmental policy is its stringency, which affects eco-innovation in both stages. In addition, strict regulation can result in the creation of lead markets when supported by global demand or regulatory trends (Beise and Rennings, 2005). Our synthesized findings are consistent with the findings of Arfaoui et al. (2014), who stressed that stringency is the most determining feature of policy. Furthermore, economic incentive instruments tend to spur eco-innovation in both stages. In particular, government subsidies/grants, taxes, and voluntary agreements incite eco-innovation in both stages. An important driver of eco-innovation in both stages is market pull factors. Therefore, researchers (e.g., Kesidou and Demirel, 2012) stressed that customer pressure steers companies to undertake eco-innovation but not to invest heavily in it. An interesting finding by Li (2014) indicates that overseas, but not domestic, customer pressure works as a driver of eco-innovation. Another driver of eco-innovation is expected cost savings, which spur eco-innovation in both stages. Drivers that appear only in the development/innovation stage including customer benefit, providing information to consumers and eco-labeling activities, market research on the potential of environmental innovation, measures pertaining to waste disposal or redemption of own products, and cost pressure, while supply-side factors spur eco-innovation in both stages. New market creation/opportunities or increases in market share and improvement of company reputation/image act as drivers in both stages, though primarily in the adoption/diffusion stage. Expected increases in product quality, potential revenue, and a desire to strengthen the brand drive eco-innovation in both stages, while company efficiency/productivity, economic risk and uncertainty appear only in the adoption/diffusion stage. While gain of competitive advantage more frequently spurs eco-innovation in the adoption/diffusion stage. Furthermore, collaboration with external partners seems to drive eco-innovation primarily in the development/innovation stage. Several researchers emphasized that eco-innovation requires more external knowledge and information than general innovation, thus, in order to obtain knowledge and other information, companies seek external sources of information and engage in cooperation with external actors to a greater extent than do companies for general innovation (Belin et al., 2011; De Marchi, 2012; De Marchi and Grandinetti, 2013; Pereira and Vence, 2012; Yarahmadi and Higgins, 2012). Moreover, supplier involvement, competition pressure, and stakeholder pressure drive eco-innovation in both stages. Bansal and Roth (2000) argued that companies that were driven by competitiveness actively eco-innovated to enhance their market position, while companies that face international competition are even more likely to eco-innovate (Brunnermeier and Cohen, 2003). Nesta et al. (2014) stressed that environmental policies seem to be more effective when the markets are more competitive. Supply chain pressure clearly drives eco-innovation predominantly in the adoption/diffusion stage. Meanwhile, public awareness/pressure drives eco-innovation only in the adoption/diffusion stage, while employees induce eco-innovation in both stages. Findings also indicate that coercive pressures, normative pressures, and mimetic pressures spur eco-innovation only in the adoption/diffusion stage and, moreover, work as a driver only of green supply chain management practices, while managerial environmental concern triggers eco-innovation mainly in the adoption/diffusion Please cite this article in press as: Hojnik, J., Ruzzier, M., What drives eco-innovation? A review of an emerging literature. Environ. Innovation Soc. Transitions (2015), http://dx.doi.org/10.1016/j.eist.2015.09.006

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stage. Managerial environmental concern also affects the speed and the scope related to the response to environmental issues (Agan et al., 2013; Eiadat et al., 2008; Qi et al., 2010) and works as a moderator of the relationships among green product innovation, firm performance, and competitive capability (Ar, 2012). Meanwhile, top management support drives eco-innovation in both stages, while corporate social responsibility appears more frequently in the adoption/diffusion stage. Furthermore, training affects eco-innovation only in the adoption/diffusion stage, while a higher degree of functional interface between environmental specialists and product development personnel affects eco-innovation only in the innovation/development stage and is a driver only for environmental product development. Most studies identified the technology push factor (R&D) as a facilitator of eco-innovation in the innovation/development stage, while it also works as a facilitator of eco-innovation in the adoption/diffusion stage. Moreover, companies’ technological capabilities and green capabilities work as facilitating factors in the innovation/development stage as well as the adoption/diffusion stage. Researchers also found that physical resources facilitate eco-innovation mainly in the adoption/diffusion stage, while financial resources and human resources exert effects in both stages. EMS exert an effect on eco-innovation and play an important role as a facilitating factor of eco-innovation in both stages. Among the EMS certifications, only ISO14001 affects eco-innovation in both stages, while ISO9001 and EMAS exert effects only in the innovation/development stage and TQEM only in the adoption/diffusion stage. Furthermore, product design with life cycle analysis, take-back systems for products, past environmental investments, and firm performance act as drivers only in the development/innovation stage. Finally, concerning the general characteristics of companies, company size positively affects eco-innovation in both stages, while company age affects eco-innovation only in the stage of development/innovation. Company size is positively associated with eco-innovation propensity (De Marchi, 2012), meaning that larger companies are more likely than smaller companies to undertake environmental innovation (Alvarez Gil et al., 2001; Hofer et al., 2012; Kesidou and Demirel, 2012). The larger the company, the greater the likelihood and extent of eco-innovations, stems from the well-known advantages of large companies in innovations (availability of finance and other resources devoted to innovation, systemized R&D departments) but also from the visibility and size of the company (the associated requirements that large firms encounter to lower their environmental impact in order to satisfy green groups and governments) (Kesidou and Demirel, 2012). Concerning company age, researchers (Rehfeld et al., 2007; Ziegler and Rennings, 2004) have found a U-shaped relationship between company age and the probability of the realization of environmental product innovation and/or environmental process innovation. The younger the company, the more likely it is to be (environmentally) innovative; while this (environmental) innovativeness decreases with company age, more mature companies might have developed a broader internal knowledge base, consequently leading to the realization of further product eco-innovations (Rehfeld et al., 2007).

5. Conclusions This paper scrutinized the literature on drivers of eco-innovation, taking into account differences in eco-innovation types and stages (as newly developed or implemented by a company). After synthesizing the findings of 155 encompassed studies, we came to the following conclusions. First, regulations and market pull factors clearly dominate the rest of the factors and therefore seem to be the most critical drivers of eco-innovation in companies. Furthermore, regulations remain a dominating driving force compared to other factors for different eco-innovation types (product, process and organizational eco-innovation, environmental technology and, environmental R&D); they play a role in both stages of eco-innovation (development and diffusion) and prevail over economic incentive instruments (consistent with the findings of Kemp and Pontoglio, 2011). The second finding pertains to drivers of different eco-innovation types. Specifically, product eco-innovation, process eco-innovation, organizational eco-innovation, and environmental R&D investments all seem to be driven by common drivers—including regulations, market pull factors, EMS, and cost savings—as well as to be positively associated with company size. The third finding concerns whether drivers appear in the development/innovation stage or the adoption/diffusion stage of eco-innovation. Our synthesized findings indicate that more of our analyzed studies focus on the adoption/diffusion stage. Finally, regarding the research methodology, the majority of the studies in our literature review employ a quantitative approach. Our literature review has some limitations. The main one is that we consulted only articles and papers published in the Science Direct and Wiley and Blackwell databases, potentially omitting relevant articles that were not published in either of these sources. However, this bias is likely to be very minor as these databases can be expected to cover all important journals. Moreover, we have neither consulted nor included in our synthesis books or book chapters related to drivers of eco-innovation. Another limitation pertains to our restriction of the sample period to the 15 years between 2000 and the time of the study. To partially mitigate this limitation, we later added a few articles published before 2000. Moreover, limitations associated with the literature review method lead to a methodological problem in determining the impact of drivers; each reviewed study is based on a different list of drivers or determinants, which means that other drivers are not considered. In addition, the drivers that were identified and examined in the reviewed studies are overwhelmingly proximate factors rather than distal factors or ultimate causes—such as the innovativeness of a particular sector, the distance of a country to the technology frontier, property law, systems of governance, geographic location, culture, and the international trade Please cite this article in press as: Hojnik, J., Ruzzier, M., What drives eco-innovation? A review of an emerging literature. Environ. Innovation Soc. Transitions (2015), http://dx.doi.org/10.1016/j.eist.2015.09.006

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regime.3 Finally, the last limitation regards the use of “proxy” variables. Del Río González (2009) noted that the use of proxy variables with observable data is intended to approximate the unobservable data and is thus a common practice in cases where data do not exist or are not accessible for the variables included in the analysis. While these proxies are more or less accurate for the analysis, the results of an analysis that employs such proxy data should be interpreted with care (Del Río González, 2009). In future research, the scope of included variables should be broadened and the influence of distal/ultimate factors should be considered. This research field is becoming larger as well as more valuable and acknowledged in academia and in practice, but many research gaps remain to be filled. Based on our literature review, we conclude that an investigation and more analysis of the generative mechanisms and critical conditions for different types of eco-innovation is critically needed.4 Most of the reviewed studies are based on so-called variance theories, which provide explanations for phenomena in terms of relationships among dependent and independent variables (Langley, 1999, p. 692). Del Río (2009, p. 863) argued that, although quantitative analyses are usually considered more rigorous and objective than qualitative analyses, they are less able to capture the relevance of the local institutional and socioeconomic context. Quantitative analyses frequently establish general relationships and thus omit crucial variables of the determinants for innovation/adoption of specific eco-innovations, while qualitative analyses (e.g., case studies) usually provide more detail about a specific event; however, the data gathered from a small number of encompassed cases are difficult to generalize in order to provide policy recommendations (Del Río González, 2009). Drivers can be either decisive or contributing (i.e., non-decisive) factors of eco-innovation implementation/development. The synthesized findings of our paper are mainly built on quantitative research and thus analyze the relative strength of specific factors that work as motivators or facilitators of certain eco-innovation types, while their decisiveness remains a topic for further analysis. Del Río González (2009) suggested the use of a combination of quantitative and qualitative methods to obtain greater insights into the process of eco-innovation change. To investigate the generative mechanisms and critical conditions for different types of eco-innovation, we would need to adopt process theory. Process research is concerned with understanding how things evolve over time and why they evolve the way they do; thus, temporal ordering and probabilistic interaction between entities are of great importance here (Langley, 1999). Langley (1999) pinpointed that understanding patterns in events is key to developing process theory; hence, the analysis of process data requires a means of conceptualizing and detecting patterns among events. Thus, variance theories are not a sufficient or valid approach to identify, understand, and further investigate generative mechanisms and conditions of eco-innovation. 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We thank an anonymous reviewer for addressing this point We thank an anonymous reviewer for this insight.

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