Sustainable innovation in for-profit organisations: the role of stakeholder involvement

<p>There is an increasing shift in perspective from a shareholder view of the firm to a stakeholder view of the firm. The reason for this shift is because there is a call by society for stakeholder involvement in organisational decision making. To involve stakeholders in organisational decision making, organisational innovation, driven by financial performance, is no longer sustainable. In the academic literature, while there exist many studies on organisational innovation, there is relatively little study conducted on organisational aspects of sustainable innovation. Moreover, within the body of literature on stakeholder involvement in sustainable innovation, most studies have focused on product and process innovation. Thus, this thesis investigated the role of stakeholder involvement in sustainable innovation. Using a two-stage research approach, this thesis was framed with the theoretical lens of a complex adaptive system (CAS), stakeholder identification, and instrumental value of stakeholder involvement. The first stage, a pilot study, consisted of a quantitative (online survey) and qualitative component (semi-structured interviews). Findings from the pilot study provided themes that directed the second stage main study - a documentary analysis of annual reports of 200 MNEs. The key findings of this thesis are listed in subsequent paragraphs.</p> <p>First, stakeholder involvement in sustainable innovation embodies the non-linearity, self-organisation and emergent aspects of CAS. This finding revealed the paucity of scholarly studies on stakeholder identification in a complex adaptive system. This is because, to understand who and what really counts for sustainable innovation, stakeholder identification in practice is evolving away from the seminal work by Mitchell et al. (1997). For instance, MNEs have begun to identify the natural environment as a key stakeholder, with the power to determine the survival of organisations. This contrasts with Mitchell et al.'s (1997) typology of stakeholders, which considers nature as lacking in power to influence organisational decision making.</p> <p>Second, this thesis revealed a significant finding on the instrumental value of stakeholder involvement for sustainable innovation. On the one hand, MNEs are motivated to involve their stakeholders in sustainable innovation if it leads to commercialization of technological innovations. On the other, the findings highlight the evolving nature of the instrumental value of stakeholder involvement beyond financial performance. This demonstrates that there is a dichotomous view amongst the MNEs on the purpose of stakeholder involvement for sustainable innovation.</p> <p>Third, this thesis found that the mechanisms for stakeholder involvement in sustainable innovation are primarily information communication technology. However, it found that the information technology sector is currently unregulated. This thesis likewise found that majority of the organisations under the technology sector who officially committed to sustainable business practices did not provide information on the role of stakeholder involvement in sustainable innovations. This regulatory void is identified as the cause of unsustainable resource utilisation amongst MNEs within the information technology sector. Specifically, this finding points to the pitfalls of self-regulation and reporting mechanisms to stakeholders by individual companies.</p> <p>Fourth, this thesis found that while scholars within the stakeholder field of research have called for a partnering mentality toward stakeholder management, in practice, the traditional structure for decision making driven by the shareholders continues to dominate. The dominance of the shareholder view of MNE stakeholder management continues to influence scholarly work within the corporate governance field of research regarding sustainability performance. This dominance is exacerbated by the regulatory environment's use of financial metrics as a mandatory performance reporting criterion. Consequently, MNEs' views of sustainability performance and stakeholder involvement continue to be understood as a voluntary exercise to appease society and as a marketing mechanism by the MNEs themselves.</p> <p>Finally, this thesis revealed an unintended finding, which is MNE understanding of stakeholder terminology in practice. While the most cited stakeholder groups (customers, employees, suppliers, and investors) are usually considered primary stakeholders within academic scholarship and by practitioners, MNE mention of competitors reveals that MNEs either do not fully understand who their stakeholders are or what the stakeholder terminology means. This lack of clarity is traced to fuzziness around the unit of analysis for stakeholder identification and involvement employed by academic studies at a macro level.</p> <p>In conclusion, the findings have implications for academic scholarship and policy making. Regarding academic scholarship, the void before the study of stakeholder involvement in a complex adaptive system (stakeholder identification) echoes Venkataraman's (2019) review of the academic literature on the stakeholder approach to corporate sustainability which found that arguments for the instrumental value of stakeholder theory dominate the literature, while the descriptive and normative approach to stakeholder theory remains weak by comparison. A similar observation on the weakness of the normative and descriptive approach to stakeholder theory was made in the study of MNE understanding of stakeholder terminology.</p> <p>The lack of clarity on the unit of analysis in academic studies demonstrated that the weakness in the normative and descriptive aspects of stakeholder theory contributes to MNE lack of understanding of stakeholder terminology. Additionally, for sustainable innovation policy making, stakeholder identification must be normatively driven if it is to be applied in emerging market contexts. If academic scholars continue to focus on only the instrumental value of stakeholders, without providing a solid foundation as to who are considered stakeholders, the stakeholder field of research will risk being a tool for unsustainable business practices. Evidently, with the practice of stakeholder involvement for outcomes beyond financial performance, scholarly work to reconceptualize the existing normative/instrumental stakeholder theory nexus will put stakeholder theory on solid ground as an instrument for corporate sustainability.</p> <p>Within the field of policy making, the continued regulatory stance on using financial metrics to determine MNE performance discourages these organisations from contributing to sustainable development. Clearly, this regulatory stance provides MNEs with the excuse not to reorganise their stakeholder management structure to comprehensively represent stakeholders critical to their survival. Thus, as long as stakeholder power is driven by financial-resources instead of knowledge-based resources, MNEs will continue to follow a shareholder view of the firm.</p>