A Conceptual Framework to Navigate Sustainability Innovation Implementation: The Duet of Dynamic Capabilities Theory and Institutional Theory

Sustainability has been put on top of the list by almost all stakeholders in our society due to the alarming climate and social issues around the world. Therefore, managers have to bring sustainability into the core of business innovation to ensure their survival, avoid reputation and legitimacy risks as well as seize competitive advantages. This chapter proposes a comprehensive framework to guide organisations to implement sustainability innovation to gain competitive advantages. Dynamic capabilities theory, neo-institutional theory, and institutional logics perspective are employed to provide a comprehensive framework to understand, analyse, and implement sustainability innovation. With the rapid development of technologies, the landscape for sustainability practices is also evolving at a tremendous pace. In this setting, recent literature has promoted dynamic capabilities theory as a potential framework for firms to understand how they can adjust their capabilities for the successful execution of sustainability innovation. However, some researchers criticised dynamic capabilities theory for ignoring contextual factors and environmental pressures which are imperative in shaping the values of social obligations that organisations have to commit to. In this conceptual research, the neo-institutional theory and institutional logics perspective are put in place to account for the institutional contextual factors that impact sustainability innovation implementation of organisations. In extant research, these theories are often applied separately which might impede their power in enabling understanding of the innovation implementation. This conceptual research integrates these theories and perspective so that they can enrich each other to provide a holistic understanding of sustainability innovation execution.