Research Proposal
Sustainable Futures: Predisposition of Innovative Enterprises to Engage in Practices of Sustainable Development - Firm-Level Evidence
Research Interest
In September 2002, I led a small team on an overseas tour to study and understand the mechanisms that made an individual creative, and a group and an organisation innovative. We were looking for methods that could help public entities in Singapore, which were steeped in the culture of continuous improvement, to innovate.
The trip took us from the east to the west coast of the United States of America. We visited government agencies, like the Pentagon and the US Navy Strategic Studies Organisation; Universities and research centres like the Harvard University, MIT's Sloane Business School, George Washington University, Berkeley University, and Cap Gemini Ernest and Young's Centre for Business Innovation; and global companies, like Solectron, General Motors, General Electric, and 3M.
Although a large number of entities we visited were practicing innovation, had innovative cultures, or were creating innovative products and services, these entities were at lost in describing and explaining how they reached this state of development. They were unable to advise aspiring organisations on how they too could be innovative.
At about the same time I was overseas, the body of work on innovation that I had studied were found to be fragmented and overly specialised. They covered the peripheral elements of innovation but none was able to provide a complete articulation of what made entities innovative and how this effort could be sustained.
Five years have since past. My interest has not changed. However, as I gained a deeper understanding of the concepts sustainable futures, sustainability, and sustainable development, my interest in innovation now includes the capability and capacity of innovative enterprises in supporting sustainable development and growth.
Research Purpose
The objective of this research is to find out if enterprises that are innovative are also more predisposed to engage in practices of sustainable development.
If there is evidence pointing to this, it may confirm that enterprises that are innovative do develop along some pre-determined lifecycles, and it also suggests that after becoming innovative enterprises, in their next stage of growth, they are more likely to adopt sustainable development strategies to achieve favourable but balanced financial, social, and environmental bottom-lines.
This knowledge may encourage practitioners of organisational development and transformation to focus their efforts in making enterprises innovative than sustainable, and let the natural lifecycles of enterprises push these entities toward sustainability.
More importantly, I hope my efforts could help me uncover, describe and explain the relationships between innovation and sustainability. If the hypothesis of innovative entities having higher tendency to engage in sustainable activities could be established, it may provide the motivation to invest efforts into studying how these entities made the switch. Methodologies could be developed to replicate these switching actions in the innovative entities currently looking for new avenues of growth.
Researchable Questions
To do this research, I need to look for answers for the following related questions. I hope that by answering these, I am able to explore the inner workings of innovative enterprises, describe the organisational dynamics at work, and explain why these make them more likely to engage in practices of sustainable development. These questions are:
- Is there such a thing as an innovative enterprise?
- What are the unique attributes that make these enterprises innovative?
- What does the literature inform on the lifecycles of enterprises?
- Are innovative enterprises more predisposed to engage in practices of sustainable development?
- Why are innovative enterprises more inclined to do so?
Literature Review
Several researchers, following the likes of their peers in biological sciences, have proposed that the development and growth of enterprises follows a generic life cycle, which starts with birth and ends with death (Chandler, 1962; Greiner, 1972; Miller & Friesen, 1984; Smith, Mitchell & Summer, 1985; Hanks, Watson, Jansen & Chandler, 1993).
A stage in the life cycle, as defined by Hanks, Watson, Jansen, and Chandler (1993), is a 'unique configuration of variables related to the organisation’s context and structure'. The context includes the enterprise’s age, size, growth rate, focal tasks, or challenges, while the structure relates to its operational levels, horizontal integration, and vertical differentiations. One of the earliest researches in this field is conducted by Chandler (1962), who identifies four stages of ‘development’, ‘growth’, ‘maturity’ and ‘decline’. Others, like Smith, Mitchell, and Summer (1985) have revealed three stages while Adizes (1989) reports ten. Although there is no agreement on the number of stages in a life cycle, a study by Miller & Friesen (1984) establishes the prevalence of complementarities and differences among variables between stages.
However, all the literature agrees that the enterprise adopts different strategies and structures as it moves from one life stage to another. Miller (1989) identified seven life stages, which are strongly correlated with the nature of leadership in the enterprise. In the fourth stage, the dominant management style is that of the Synergist, who is capable of escaping his own conditioned tendencies towards one style, and unifying all the styles of leadership in the life cycle into a single leadership framework. The two principles followed by the Synergist are creativity – the creation of new and improve products, services, and methods of production and selling; and purpose – the creation of real wealth by serving its stakeholders, which is a function of leadership in instilling and reinforcing social purpose in the enterprise.
Enterprises Are Compelled To Move Along Their Life Cycles
It is interesting to know that Miller & Friesen (1984)’s study does not show that enterprises went through the life stages in the same sequence. One could conclude that the life cycles of enterprises are unique and they seem to be influenced by some common denominators, which compel the enterprise to innovate its strategies and structures to move from one life stage to another. These influences include:
- The life cycle of an idea and the life cycle of technology. Davenport & Prusak (2003) describe the P-cycle of a idea within an enterprise to begin with ‘progenitor’ through, ‘pilot’, ‘project’, ‘program’, ‘perspective’, and conclude with ‘pervasiveness’, while the life cycle of the idea after market introduction is ‘discovery’, ‘wild acceptance’, ‘digestion’, ‘decline’ and ends with ‘hard-core’. They suggest that the external cycle drives the internal cycle, and sometimes to the detriment of the internal one. UNIDO, in their manual on Technology Transfer Negotiation (1996), presents the technology life cycle, which consists of life stages of ‘research and development’, ‘ascent’, ‘maturity’, and ‘decline’. The document indicates that enterprises respond differently to the management of their technologies, patents and trademarks, which create and protect their products and services, through time. The life cycle of the enterprise is seen entrenched in the P-Cycle and technology life cycle, and they influence the lifespan of the enterprise.
- The S-curve. Through the use of sustaining and disruptive innovations (Christensen, 1997), enterprises have been found able to side step the bell curve cycle of ‘growth’, ‘maturity’ and ‘decline’ to develop and expand beyond their natural life expectancy into new growth (Keyes, 2006). These enterprises found a way to stay pristine.
- The parameters that are already tightly pre-defined. An enterprise is made up of a configuration ‘words already spoken, routines and procedures already formulated’ (Fonseca, 2002). They work together to cause the enterprise to function and fulfil its purpose. However, this ‘whole’ is not complete or finished because an enterprise is required to respond to gestures made by other enterprises. The ‘whole’ is also not complete because of the ethical dimension of human action requiring them to constantly negotiate and justify their action to each other. Furthermore, any stability in those patterns will be temporary because this ‘whole’ is both formed by and forms the individuals participating in it at the same time. The ‘whole’ is both stable and unstable, and constraining and liberating at the same time. This indicates that enterprises may have a choice in how they operate, developed and grow, their linear innovation models, and the path-dependencies and trajectories in the prevailing techno-economic paradigms of the industry will distinct the life cycle of one enterprise from another (McLoughlin, 1999).
- The number of enterprises in the market. Organisational ecology looks at the founding of a new enterprise and its death as organisational growth. It predicts that the rates of founding and rates of mortality are dependent on the number of enterprises in the market (Barnett and Hensen, 1996, Barnett, Carroll, Hannan, 2002). Here, the central mechanisms are legitimisation - the recognition on that group of enterprises, and competition. Legitimisation generally increases (at a decreasing rate) with the increase in the number of enterprises but so does competition (at an increasing rate). The result is that the competitive process will prevail (Carroll & Hannan, 2000) and the founding rate will first increase with the number of enterprises, due to an increase in legitimisation but will decrease at high numbers due to competition.
- The evolution of innovation in the industry. Rothwell (1994) describes five known generations of innovation in any given industry. The life cycle of the industry seems to have an impact on the nature of the life cycles of those enterprises in it. These generations are:
· In the first generation, the focus is on pushing innovation into the market.
· The second generation looks at the needs of the customers or the market to pull innovation from the enterprise.
· At the third generation, the need to push technologies into the market and the need to pull them from the enterprise according to customers expectations are considered
· During the fourth generation, there is tight coupling of research and development, and marketing activities, together with strong supplier linkages, the industry makes efforts to establish close coupling with leading customers.
· Finally, in the fifth generation, the enterprises in the industry are built for system integration and modelled for networking. Here innovation is a product of strategic partnerships with suppliers and customers, the use of expert systems, collaborative research and marketing arrangements, with an emphasis on flexibility and speed in development, and a focus on quality and other non-price factors.
These indicate that it is unlikely to observe two enterprises share similar strategies and structures while they share the same life stage. It also confirms earlier observations that the enterprise need not have to go through the same life stages as other enterprise. There driving factors are outside the control of the enterprise. They regulate how they move about in their life cycles. These studies seem to say that enterprises are compelled to move along their life cycles in order to stay competitive and survive.
Enterprises Need to Age Innovatively to Do Sustainable Development
Traditionally, economic growth and environmental activities have been seen as 'contradicting and incompatible' (Johnson & Turner, 2003). The key driver for the divide is the lack of a 'commercial edge' (Charter & Clark, 2007) that motivates enterprises to engage in efforts of sustainable development.
Towards the 1990s, the birth of ecological modernisation (Johnson & Turner, 2003) saw enterprises adapting capitalism to environmental challenges. Enterprises have learnt that by balancing their economic continuity with social welfare and natural capital protection, they are creating conditions to operate and grow (Keijzer, 2005). This has taken the views on environment from the margins of politics and society in the 60s through the think-tanks and conferences of the 70s into mainstream discourses on how enterprises should acquire and secure their rights to exist in their markets.
The change sees the rise of Technocentricism (Johnson and Turner, 2003), where emphasis is placed on innovation and technology to deliver both growth and environmental benefits. Sustainability driven innovation is defined as the ‘creation of new market space, products and services or processes driven by social, environmental or sustainability issues’ (Arthur D. Little ,2004).
Many scientists regard innovation as a complex process of components interacting with each other, constantly adjusting with each other (Turina, 2004). Nevertheless, Charter & Clark (2007) have prescribed four straightforward levels of sustainable innovation that can be defined in the context of environmental improvement. These are:
- Level 1. Consist of small but progressive incremental improvements to existing products and services.
- Level 2. Involved major re-design of existing products and services but limited to those
- levels of improvement that are technically feasible.
- Level 3. Alternatives, in terms of products or functions, are introduced as substitutes.
- Level 4: The enterprise is designing products and services for an sustainable society.
They have found that few enterprises have reached level 4 although there is pressure from the government and society for them to reach this level of sophistication. This pressure for change could be traced to the ascendancy of long term stakeholders (Keijzer, 2005). Unlike the short term ones, who are concerned about the immediate goals of protecting the reputation of the business and keeping the status of 'business as usual', long term stakeholders look at sustainable development of the society and continuation of the business over time.
They are aware of the need for enterprises to move beyond co-efficiency and into resource productivity. They understand that the dynamics in the eco-system have to be protected to enable the reuse of its stocks of natural capital. While recycling and reusing of exhaustible resources could be brought back into the production cycle, this is not the case with fossil energy, biodiversity and land, which are non-renewable. As these are also auxiliary resources in the recycling of exhaustible and renewable resources, and for the cleaning of polluted environments, the preservation of these key stocks, which is a limiter of growth, needs political attention.
In order to survive, enterprises must adapt to radically new and emergent technological and market conditions (McLoughlin, 1999). Enterprises have to adjust their production-consumption system to meet these expectations. Any change to the systems will require technological ‘know how’. Enterprises have to innovate in the ways they are managed (Braungart & McDonough 2000) to absorb these ‘know-how’ in order to keep their rights to exist in their markets. This means they need to go beyond the traditional networks of organisation and supersede traditional competitive relations. The resource based theory stresses the need for enterprises to maintain a flexible internal organisational architecture capable to adapt to these changing needs so that there is an innovative capacity to sustain the new production-consumption system. In other words, the enterprise has to age innovatively in its life cycle to accomplish this.
Damper On Ecological Modernisation
Successful innovative enterprises use innovation management as the core of the competitive strategy. Zirger and Maidique (1990) researched 330 cases and identified major themes characterising successful innovative enterprises. These include excellence of management – careful planning of all phases and the coordination and integration of departments, value for customers, strategic focus, management commitment and market pioneering. Similar conclusions are drawn from studies by Johne and Snelson (1990), Cooper and Kleinschmidt (1988), Gupta and Wilemon (1990), and Crawford (1991).
The Economist and Nikkie Research (Riederer, Baier and Graefe, 2005) found that 80% of the 456 CEOs interviewed said that their primary goal has shifted from cost-cutting to revenue growth. Two third expect growth to come from new products and services that have to be developed within 5 years. To achieve the new growth objectives, 90% of the CEOs would expect to transform their enterprises within 5 years, to become more responsive, particularly to customer demands. Over half expected the transformation to happen within 2 years. This shows the special role innovation plays in these enterprises.
However, from a historical perspective, established innovative enterprises have been found to be not successful in making radical shifts into new technologies and production systems (Keijzer, 2005). There are numerous obstacles preventing enterprises from undergoing the change and exploiting the new environment. Their inablility to appreciate and understand conceptual arguments for sustainability, physical and situational factors, matters surrounding markets and concerning organisation and financial arrangements, policy and regulatory constraints, and decision making systems, and the lack of practical experiences and information (Charter & Clark, 2007) have conspired to prevent enterprises from moving into the next phase of growth.
These show that enterprises encounter inertia to change easily and often (Barnet, Carroll & Hannan, 2002; Carroll & Hannan, 2000; Hannan & Freeman, 1977). Companies with enduring competition are better at surviving (Barnet & Hensen, 1996) but their need to be reliable and accountable creates a high degree of inertia and a resistance to change. This makes changes to the 'company blueprint' (Barnett & Hensen, 1996) more disruptive than changing their executives. It is doubtful if the resistance would fall when the risk is shared and reduced when environmental improvement becomes a centrepiece for industry as a whole (Ashford, 1994).
Moreover, globalisation raised two potential dampers on ecological modernisation. These are:
- The use of pollution haven and the race to the bottom. Instead of moving to the next stage of their life cycle, enterprises avoid the change by shifting their operations to countries with less stringent environmental standards thereby forcing countries with higher standards to lowers theirs to retain the jobs that may have been lost with the shift. Medalla & Lazaro (2005), among many others, have indicated that this hypothesises do not exist for most industries.
- The Environmental Kuznet Curve (EKC). The hypothesis says that at low incomes, environmental impact per dollar DGP increases with increasing GDP per capital, while at high incomes it declines (Benedict, 2003). In the beginning of economic development, little weight is given to environmental concerns, raising pollution along with industrialisation. After a threshold, when basic physical needs are met, interest in a clean environment rises, which reverses the trend. Now, the society has the funds, as well as the willingness to spend on innovations that reduce pollution. This relation holds true for a few pollutants, such as sulphur dioxide and nitrogen oxide (Deacon & Norman, 2006), but there is little evidence that the relationship holds true for non-local effects, like greenhouse gasses. Some evidence shows that a particular innovation is likely to be adopted preferentially in high income countries 1st with a short lag before it is adopted in the majority of the poorer countries. However, emissions maybe declining simultaneously in low and high-income countries over time, though the particular innovations typically adopted at any one time could be different in different countries (Stern, 2003). Energy, land and resource use, or ecological footprint, do not fall with rising income. While the ratio of energy per real GDP has fallen, the total energy use is rising in most developed countries. The status of many key services provided by ecosystems, like freshwater provision and regulation, soil fertility, and fisheries, have continued to decline in developed countries (Harbaugh, Levinson and Wilson, 2002). Levinson (2000) even point out that there is no evidence to suggest that environmental quality deteriorates steadily with economic growth.
In this confused state, it seems that income growth is not enough to make enterprises innovate to practice sustainable development in their operation. Improvement of the environment with income growth is not automatic but has to depend on policies and institutions (Yandle, Vijayaraghavan and Bhattarai, 2002).
According to Sigurdson and Cheng (2001), the innovative capability of institutions and companies can be supported by national and corporate innovation policies. They also concluded that a national innovation system should have elements that stimulate the innovativeness of its organisations, stimulate the innovative competence of a nation’s commercial firms, and link institutions and firms into a coherent national innovation system.
In a study that covers a 16-year period (Bossink), also found that sustainability can be developed within the framework of a national innovation system, as long as industry and research institutions are in the centre with the government in the peripheral of this system, and the firms that are not cooperative are be forced by law to adopt a set of sustainable standards.
25 Most Innovative Enterprises Also the Most Sustainable Organisations
In 2006, the Business Week and Boston Consulting Group unveiled a list of 25 most innovative organisations in the world (McGregor, 2007). They were recognised for being able to develop breakthrough products, rewiring their operational processes and coming up with new business models, and capable of sustaining innovation.
Cross referring these 25 enterprises with the Dow Jones Sustainability Indexes (http://www.sustainability-indexes.com/) reveals a surprise. They are also equally successful in conducting sustainable development activities and have been recognised for their effort. Here are some additional examples:
- Starbucks Coffee Company received the 2005’s World Environment Center Gold Medal for International Corporate Achievement in Sustainable Development. Starbucks innovative Coffee and Farmer Equity (C.A.F.E.) Practices Program – an initiative that provides incentives worldwide for suppliers who meet high quality, transparency, environmental, and labour standards was singled out as the reason of this award (The World Environment Centre, 2005).
- In the ninth annual survey of the Dow Jones Sustainability Indexes, BMW topped the automotive index for the third year running as the World's Most Sustainable Companies (GreenBiz.Com., 2007).
- Business Ethics magazine recently ranked the Intel third among the 100 most ethical companies and for the fourth year in a row, the chip-maker was named the technology sector leader in the 2004’s edition of the Dow Jones Sustainability Index (Klimley, 2005).
- American Honda Motor Co. has opened its 211,000-square-foot prototype "green" facility in Gresham. The parts distribution and mechanic training centre is American Honda's first step into the realm of energy-efficient, low environmental impact, occupant-health-conscious construction – a host of building design considerations typically lumped together as ‘green design’ (Vesbach, 2001).
Why Are these 25 Enterprises Special?
At this juncture, three recurring themes are observed from the literature under review:
- After becoming innovative, enterprises may not necessarily embark on sustainable development as their next development. However, the 25 most innovative enterprises have done so. Does this mean that there is indeed a natural transition for innovative enterprises to become sustainable organisations or is this a result of national policies and institutions?
- The 25 most innovative enterprises are first and foremost innovative before been recognised as sustainable organisations. Does this mean that innovative enterprises are more pre-disposed to activities of sustainable development because of their innate capability and capacity to innovate?
- Many researchers concluded that enterprises are unlikely to make radical changes that would rewire their ‘company blueprint’, yet these 25 enterprises are able to do it and make substantial contribution to the society and environment. Is there something special about these enterprises or are the researchers incorrect in their conclusions?
Research’s Conceptual Framework
I am thinking about using the triple bottom-line framework to resource management (Figure 1) as the conceptual framework for the study.
Figure 1: Triple Bottom-line Framework to Resource ManagementIn this viewpoint, sustainability is examined from an integrated manner (Dunphy, Benveniste, Griffiths, & Sutton (2000):51). It takes on a more inclusive approach of using creativity, innovation and entrepreneurship as a means to address all the concerns relating to organisational, human/societal and ecological sustainability. The start point is not exploitation or trade offs, but a genuine attempt to develop a sustainability framework where all interest groups co-exist. Organisations have the personal, collective and corporate capabilities to achieve this. The strategies and plans for resource management are developed together with the formulation of the business model to avoid development as an afterthought or ‘at the end of the pipeline’.
In this study, I like to use this framework to guide me:
- In finding out the human and ecological challenges championed by the long term stakeholders in these 25 innovative enterprises. The origins of the stakeholder concept can be found in management theory. It analyses the behaviour of the enterprise in terms of the interests it affects, or that are affected by the activities of the enterprise. I like to identify the identities of these stakeholders and the pressure they assert to compel these 25 enterprises to transit from being innovative enterprises into sustainable organisations (Achterkamp & Vos, 2002).
- Into uncovering the unique attributes that cause these enterprises to stay in the ranking table of the world’s 25 most innovative enterprises and later becoming sustainable organisations. To sustain organisationally, the enterprise has to ‘keep up with technological change, cherish the people who makes up a company, and be flexible enough to change markets and change products as and when necessary’ (Doig, 1999). I am keen to find out where these innovative enterprises excel in organisational sustainability, how these are leveraged to propel these innovative enterprises to become sustainable organisations and are leverage in practices of sustainable development.
Research Methodology
I think this study should use a quantitative, descriptive, cross-sectional survey design to determine if innovative enterprises are more pre-disposed to practices of sustainable development.
A questionnaire, containing no more than 50 questions, should be distributed to all the 25 most innovative enterprises, which are also listed in the Dow Jones Sustainability Indexes. The number of questions is restricted to 50 to prevent survey fatigue. A return of 80% of these questionnaires from these enterprises is deemed good spread for making the analysis fairly accurate.
As the information collected from the enterprises could be sensitive, I may comply to sign a non disclosure agreement to assure that no specific information that could be trace to the respondent would be released to the public. To avoid thieve, espionage, and lost of questionnaires, all returned questionnaires should be encoded with a reference number and the names referenced to these codes will be securely kept away from the site of analysing the data.
The strength of the proposed methodology come in the fact that it is straightforward but follow up may proof to be difficult when there is a need to uncover more information when the data from the questionnaire reveals interesting trends. Unless, I could identify the respondents, conducting a follow up interview could be difficult.
Conclusion
This proposed research will add on to the existing body of knowledge on sustainability. It will provide some insight into the factors that compel an innovative enterprise to adopt practices of sustainable development and eventually becoming sustainable organisations itself.
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This research proposal (1st Draft) was first written on 1 Nov 2007.
