Sustainable Production and Consumption 25 (2021) 271–284

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Sustainable Production and Consumption

journal homepage: www.elsevier.com/locate/spc

Research article

Does second-order social capital matter to green innovation? The

moderating role of governance ambidexterity
Yunhui Zhao a, Xue Zhang a, Wenbo Jiang b, Taiwen Feng c,∗
a
School of Business Administration, Inner Mongolia University of Finance and Economics, Hohhot, China
b
School of Management, Northwestern Polytechnical University, Xi’an, China
c
School of Economics and Management, Harbin Institute of Technology (Weihai), Weihai, China

a r t i c l e i n f o a b s t r a c t

Article history: Despite the importance of social capital on green innovation has been recognized, our knowledge of the
Received 4 May 2020 influence of second-order social capital is still unclear. Based on social exchange theory and transaction
Revised 4 September 2020
cost economics perspective, we develop hypotheses regarding the impacts of second-order social capital
Accepted 4 September 2020
on green innovation, as well as the moderating role of governance ambidexterity (i.e., balanced dimension
Available online 10 September 2020
and combined dimension). We use questionnaires to collect data from 212 Chinese firms and conduct
Keywords: hierarchical regression analysis to test hypothesized relationships. The results suggest that second-order
Second-order social capital social capital from both customers and suppliers have positive effects on green exploitative innovation
Governance ambidexterity and exploratory innovation. Balanced dimension strengthens the effect of second-order social capital from
Green innovation customers on green exploratory innovation while weakens the effect of second-order social capital from
Moderating effect suppliers on green exploratory innovation. Further, combined dimension strengthens the effect of second-
order social capital from suppliers on green exploitative innovation while weakens the effect of second-
order social capital from customers on green exploitative innovation. This research enriches the literature
on social capital and green innovation.
© 2020 Institution of Chemical Engineers. Published by Elsevier B.V. All rights reserved.

1. Introduction ence of firms’ second-order social capital (SSC) on green innovation

It is critical for green innovation to maintain sustainable de-
velopment because of facing increasingly environmental pollution
and strict environmental regulations (Ardito and Dangelico, 2018;
Feng and Wang, 2016). Green innovation not only significantly in-
creases firms’ environmental, financial and social performance, but
also solves environmental problems and attracts increasingly at-
tention (Ardito and Dangelico, 2018; Holzner and Wagner, 2019).
However, few firms have the complete information and resources
to promote green innovation (Huang and Li, 2017). Therefore, large
amounts of firms are looking outside their firms for information
and resources for green innovation (Dai et al., 2015). The signifi-
cance of social capital of firms in promoting green innovation has
been argued in previous studies related to green innovation and
supply chain management (Arfi et al., 2018; Chen and Hung, 2014).
However, most studies have only focused on how the focal firms
benefit from their first-order social capital and ignored the influ-
∗
Corresponding author.
E-mail addresses: jiangwenbo@mail.nwpu.edu.cn
taiwenfeng@126.com (T. Feng).
(Joshi and Rahman, 2017; Tavassoli and Saen, 2019).
Although a focal firm’s first-order social capital can bring ex-
ternal resources and information, resources and information from
first-order social capital are limited (Tsai and Ghoshal, 1998;
Weber and Kratzer, 2013). The importance of SSC should also
be appreciated (Galunic et al., 2012). In practice, the information
and resources of a firm in a network are transferred to another
firm that uses them to enhance transactions with a third firm
(Uzzi and Gillespie, 2002). Thus, we define SSC as the information
and resources obtained from the indirect social capital of a firm
(Galunic et al., 2012). Based on social exchange theory, by making
use of SSC, a firm may have access to information and resources
outside social network of the firm (Cropanzano et al., 2017). Dur-
ing the process of a focal firms’ operation, the focal firm interacts
with its customers and suppliers frequently (Awan et al., 2019;
Chae et al., 2017; Lynch et al., 2016). Therefore, in this study, we
divided a focal firm’ SSC into two dimensions: second-order social
capital from customers (SSCC) and second-order social capital from
suppliers (SSCS). We will explore the influence of two dimensions
of a focal firm’s second-order social capital on green innovation.
This research divides green innovation into green exploita-
(W. Jiang), tive innovation (GTI) and green exploratory innovation (GRI)

https://doi.org/10.1016/j.spc.2020.09.003
2352-5509/© 2020 Institution of Chemical Engineers. Published by Elsevier B.V. All rights reserved.
272 Y. Zhao, X. Zhang and W. Jiang et al. / Sustainable Production and Consumption 25 (2021) 271–284

Table 1
Comparison of previous research and this research.

Previous research This research

Research Topics Research perspective References Research points

Social capital and green
innovation
Second-order social capital
Relational governance and
contractual governance
 social capital from suppliers
 social capital from
customers
 focus on the perspective of
brokers
 focus on only one aspect:
relational governance or
contractual
 Awan et al., 2019; Bellamy et al., 2014; Yan et al.,
2017; Zhao et al., 2018
 Arfi et al., 2018; Brockhoff, 2003; Chen &
Hung, 2014; Feng et al., 2019; Lynch et al., 2016
 Galunic et al., 2012
 Abdi & Aulakh, 2017; Cao & Lumineau, 2015;
Claro et al., 2003; Cao et al., 2018; Ferguson et al.,
2005;Huber et al., 2013; Lioliou et al., 2014;
Lumineau et al., 2012; Lu et al., 2015; Poppo &
Zenger, 2002; Sheng et al., 2018; Wacker et al., 2016;
Zhou & Xu, 2012
 introduces the definition of firms’
second-order social capital and
focuses on the second-order social
capital from suppliers and customers
 investigates the effect of
second-order social capital on green
innovation from the perspective of
firms.
 introduces governance
ambidexterity, which is a
comprehensive governance method
 investigates the moderating effect
of BD and CD on the relationship
between second-order social capital of
and green innovation

(March, 1991). Green exploitative innovation emphasizes the en-
hancement of existing green knowledge and green technology,
improving existing products and services (Guan and Liu, 2016;
Yan and Guan, 2018). Green exploratory innovation is associ-
ated with searching new green knowledge, developing new prod-
ucts and technology (Bernal P et al., 2019; Yan and Guan, 2018;
Phelps, 2010). Drawing on social exchange theory (SET), we sug-
gest that SSCC and SSCS may offer distinct information and re-
sources, which are likely to influence green exploitative innovation
and green exploratory innovation in a different way (Wang and
Feng, 2018; Zhao et al., 2018, 2020). Thus, we explore how two
dimensions of firms’ SSC impact green exploitative innovation and
green exploratory innovation.
However, there is opportunism in interfirm relationships be-
cause of information asymmetry between the focal firm and its
customers or suppliers (Wathne and Heide, 20 0 0). To reduce op-
portunistic behavior and transaction costs, supply chain partners
are more likely to adopt relational governance and contractual
governance in interfirm exchange (Ferguson et al., 2005). How-
ever, previous studies on governance have been studied from only
one aspect: relational governance or contractual governance, lack-
ing of comprehensive governance method (Abdi and Aulakh, 2017;
Cao et al., 2018; Sheng et al., 2018). To fill the research gaps,
this study aims to introduce governance ambidexterity. Gover-
nance ambidexterity was divided into balanced dimensions (BD)
and combined dimensions (CD). BD refers to supply chain partner’s
relation to maintain a close and small distance between relational
governance and contractual governance, while CD refers to com-
prehensive and combined dimension (Cao et al., 2009). The two
dimensions of governance ambidexterity are conceptually distinct,
and rely on different mechanisms to moderate the effect of SSC on
green innovation. BD strengthens the effect of second-order social
capital from customers on green innovation and CD strengthens
the effect of second-order social capital from suppliers on green
innovation.
To fill the above research gaps (see Table 1), we investigate how
two dimensions of SSC (i.e., SSCC and SCC) impact GTI and GRI and
the moderating effects of BD and CD. We propose the following
four questions. First, whether SSC from customers influences green
innovation? Second, whether SSC from suppliers influences green
innovation? Third, does BD of governance ambidexterity moderate
the impacts of SSC from customers and suppliers on green innova-
tion? Fourth, does CD of governance ambidexterity moderate the
impacts of SSC from customers and suppliers on green innovation?
We use survey data collected from Chinese manufacturing compa-
nies to examine issues.
2. Literature review and hypotheses development
2.1. Exploitative and exploratory innovation
Since March used the concept of “ambidexterity” in a context
of innovation for the first time, proposing exploitation and explo-
ration (March, 1991), many researchers have studied exploitative
and exploratory innovation (Khan et al., 2019; Guan and Liu, 2016;
Phelps, 2010; Wang et al., 2014; Yan and Guan, 2018). Exploitative
innovation involves a search process that improves the organiza-
tion’s existing knowledge base (Guan and Liu, 2016; March, 1991;
Yan and Guan, 2018). Therefore, exploitative innovation aims to
improve the existing technologies or materials. In contrast, ex-
ploratory innovation is to collect of fresh and diverse informa-
tion and knowledge to organized systems (Guan and Liu, 2016;
March, 1991; Lavie et al., 2010; Phelps, 2010; Yan and Guan, 2018).
Therefore, exploratory innovation not only enriches its existing
knowledge reserve, but also brings new technologies or materials.
We introduce exploitative and exploratory innovation into the
field of environment protection and sustainable development,
proposing green exploitative innovation and green exploratory in-
novation in this research. Green exploitative innovation means that
a focal firm improves a current technology or product, making it
greener and more environmentally friendly. However, green ex-
ploratory innovation means that a focal firm invents a new envi-
ronmental protection technology or green product.
2.2. Second-order social capital
The concept of social capital is systematically analyzed first by
Pierre Bourdieu (1986). Based on Bourdieu’s analysis, two study-
ing patterns emerged, the first one is derived from social network
theorists (Belliveau and O’Reilly, 1996; Burt, 1997; Hollenbeck and
Jamieson, 2015; Methot and Rosado-Solomon, 2018), who study
social capital from personal perspective and emphasize individ-
ual benefits, such as career development. The second pattern
considers social capital as public good rather than individual
good (Coleman, 1988; Huggins and Johnston, 2012; Putnam, 1993;
Yan and Guan, 2018). The social capital concerned in these studies
is first-order social capital. However, Galunic et al., (2012) proved
the presence of SSC from an actor perspective. Therefore, the study
aims to research SSC from an organizational perspective according
to two studying patterns of social capital and expand the concept
of SSC. In this study, SSC is defined as the information and re-
sources obtained from the indirect social capital of an organization
(Fig. 1).
 Y. Zhao, X. Zhang and W. Jiang et al. / Sustainable Production and Consumption 25 (2021) 271–284
Fig. 1. Conceptual mode.
Social capital pays more attention to social network relation-
ships, which are resources available to individuals or organizations
(Inkpen and Tsang, 2005). The logic of this view can be seen in
a supply chain. Customers and suppliers are social capital of a fo-
cal firm in supply chain management. It is examined that infor-
mation from customers and suppliers influence development and
innovation of a focal firm (Zhao et al., 2018, 2020; Lynch and
O’Toole, 2016; Bellamy and Ghosh, 2014). In this study, second-
order social capital (SSC) is divided into two dimensions: SSC from
customers and SSC from suppliers. SSC from customer means that
the information and resources is from customers’ social capital. SSC
from suppliers means that the information and resources is from
suppliers’ social capital.
The degree of acquiring information from customers’ social cap-
ital and suppliers’ social capital is decided by network density
and network centrality of customers and suppliers (Gilsing and
Nooteboom, 2005; Nahapiet and Ghoshal, 1998). Because a firm
has multiple suppliers and customers, we use average network
centrality and average network density to measure the firm’s SSC
(Galunic et al., 2012).
2.3. Governance ambidexterity
Regarding to “ambidexterity”, most studies focus on the orga-
nizational ambidexterity, conflicting aspects of exploratory and ex-
ploitative orientations (Cao et al., 2009; Junni et al., 2013). Orga-
nizational ambidexterity largely refers to the management of ex-
ploitation and exploration to find the right balance between the
two (Cao et al., 2009). In this study, we introduce governance am-
bidexterity based on relational governance and contractual gov-
ernance. However, previous studies have rarely explored the re-
lationship between governance ambidexterity and green innova-
tion (Sheng et al., 2018). Most studies separately discuss the role
of relational governance and contractual governance (Cao et al.,
2018; Abdi and Aulakh, 2017; Lumineau and Henderson, 2012;
Lu et al., 2015; Claro et al., 2003; Ferguson et al., 2005), or focus on
the interplay of relational governance and contractual governance
(Cao and Lumineau, 2015; Sheng et al., 2018; Hendrikse et al.,
2015; Huber and Fischer, 2013; Lioliou et al., 2014). To fill the
reaearch gap, this study introduces governance ambidexterity,
which can be divided into balanced dimensions (BD) and combined
dimensions (CD).
273
BD refers to supply chain partners’ relation to maintain a close
and small distance between relational governance and contrac-
tual governance, while CD comprehensive and combined dimen-
sion. Table 2 illustrates this, which describes the degree of rela-
tional governance and contractual governance of firm A and firm
B. Firm A scores 10 for relational governance and 5 for contractual
governance, while firm B scores 5 for relational governance and
contractual governance. Which situation is more ambidextrous? In
this study, if ambidexterity is defined as a balance between rela-
tional governance and contractual governance, firm B is more am-
bidextrous than firm A. On the other hand, if ambidexterity is de-
fined a combined dimension of relational governance and contrac-
tual governance, the firm A can be considered more ambidextrous
than firm B.
2.4. Second-order social capital and green innovation
A considerable proportion of research has shown that social
capital and network from organizations influence innovation by
acquiring and absorbing information and knowledge (Awan et al.,
2019; Guan and Liu, 2015). From the perspective of the firms, pre-
vious studies show that social capital from suppliers has a positive
effect on green innovation (Awan et al., 2019; Bellamy et al., 2014;
Yan et al., 2017; Zhao et al., 2018) and social capital from cus-
tomers also has a positive effect on green innovation (Arfi et al.,
2018; Brockhoff, 2003; Chen & Hung, 2014; Feng et al., 2019;
Lynch et al., 2016). The social capital mentioned in the previous re-
search refers to first-order social capital. To explore SSC on firms’
green innovation, SSC represents indirect social capital for a focal
firm. In general, the focal firm has increasingly indirect social cpi-
tal, it can be more searched for the path of the external knowledge
or information. To acquire and understand indirect knowledge or
information through SSC may promote recombination or new com-
bination.
The importance of acquiring information from customers for
sustained success has been underlined in the innovation liter-
ature (Lynch and O’Toole, 2015; Zhao et al., 2018). While this
study emphasizes green knowledge or information is from its cus-
tomers’ social capital. When direct customers occupy an average
central position in its social capital, they will have advantage to
get diverse strategic resources and control information and re-
sources (Burt, 1992; Tsai, 2001). When customers have high aver-
274 Y. Zhao, X. Zhang and W. Jiang et al. / Sustainable Production and Consumption 25 (2021) 271–284
Table 2
Illustration of different conceptualizations of governance ambidexterity.
Relational Contractual
governance governance
Firm A 10 5 Low
Firm B 5 5
age network density in its social capital, which can acquire valu-
able and extensive information and resources more quickly and
agility (Ahuja, 20 0 0; Coleman, 1988; Tracey and Clark, 2003). Fur-
thermore, direct customers can gather kinds of information related
to accurate customers environmental need and preferences from
their social capital (Brockhoff and Klaus, 2003; Lynch and O’Toole,
2015). Information of customer needs and preferences is beneficial
to the focal firm’s green innovation (Feng et al., 2019).
Obtaining information from suppliers is equally important in
supply chain management (Yan et al., 2017; Zhao et al., 2018)
When the direct supplier occupies an average central position in
its social capital, which will promote the supplier to quickly ob-
tain significant and new information and technology (Yan et al.,
2017). Moreover, suppliers with an average central position can en-
sure the integrity and reality of getting green information, reducing
the risk of green information distortion (Wang et al., 2016). Fur-
ther, suppliers with high average density can validate the reliability
of green information that is exchanged in suppliers’ social capital
by interacting with different partners (Bellamy et al., 2014). In ad-
dition, suppliers with high average density contribute to establish
a stable knowledge sharing network, which encourages communi-
cation closely within the network and share tacit knowledge and
technologies (Borgatti et al., 2009; Yan et al., 2017). Suppliers can
get information about product specification, parts and components
from its social capital (Un et al., 2010; Zhao et al., 2018), which
may be pivotal to a focal firm’s green innovation.
SET considers that the focal firm and suppliers or customers
can achieve mutual benefits through the behavior of exchange
(Blau, 1964; Huo et al., 2015). Based on SET, if the firm commits
resources and information to long-term suppliers and customers,
conversely, they also send green resources and information ac-
quired from their social capital to a focal firm (Cropanzano et al.,
2017), thus the exchange behavior may promote the focal firm
green innovation.
On the one hand, green knowledge or information from SSC
may recombine or combine with extent knowledge of the fo-
cal firm, as knowledge connection relationship records the con-
tent and experience of knowledge connection in previous inven-
tions (Carnabuci and Operti, 2013). For a focal firm, recombi-
nation implies using its extent green knowledge or information
combinations to develop new green product or technology, which
is conductive to the focal firm’s green exploitative innovation.
While, new combination refers to the use of never combined green
knowledge or information of the focal firm that contains its exist-
ing green knowledge or new green knowledge, the combination of
existing ones is conductive to green exploitative innovation, and
the combination of new ones is conductive to green exploratory
innovation. On the other hand, green information acquired from
second-order social capital from customers or suppliers may facil-
itate interactions of a plentiful of distinct ideas. And these inter-
actions may lead to new ideas, which are beneficial to green ex-
ploratory innovation. Thus. we propose the following hypotheses:
H1. Second-order social capital from customers has positive impacts
on (a) green exploitative innovation and (b) exploratory innovation.
H2. Second-order social capital from suppliers has positive impacts on
(a) green exploitative innovation and (b) exploratory innovation.
Balanced dimension of Combined dimension of
governance ambidexterity governance ambidexterity
High
High Low
2.5. The moderating role of governance ambidexterity
Transaction cost economics (TCE) describes the existence of
transaction cost when a firm aims to acquire information and re-
sources externally (Williamson, 1993). From the perspective of TCE,
opportunism is considered as one of the potential risks and can
increase the transaction costs (Feng et al., 2016; Wacker et al.,
2016). To reduce opportunistic behavior and transaction costs, a
firm is more likely to adopt relational governance and contrac-
tual governance with supply chain partners (Chae et al., 2017;
Luo, 2002). Relational governance and contractual governance
are two main methods to ensure interfirm information exchange
and control potential opportunism in the process of exchange
(Johnson and Sohi, 2016). Relational governance depends on trust
and social identification, which promotes to establish shared be-
havioral expectations, such as flexibility, information sharing, soli-
darity (Abdi and Aulakh, 2017; Poppo and Zenger, 2002; Heide and
John, 1992). Contractual governance relies on the specific use of
formal contracts to coordinate interfirm exchange (Jap and An-
derson, 2003; Poppo and Zenger, 2002; Sheng et al., 2018). Well-
specified and formal contracts include each side’s right, duties,
and the principles of cooperation and reduce risk of exchanging,
then encourage subsequent cooperation (Poppo and Zenger, 2002;
Sheng et al., 2018).
2.5.1. The moderating role of the BD of governance ambidexterity
When direct customers occupy an average central position or
have high average network density in its social capital, the di-
rect customers can control and acquire valuable information or
resources. High level of BD in the relative dimension of rela-
tional governance and contractual governance makes the focal firm
obtain more information and resources via SSC from customers
(Abdi and Aulakh, 2017; Cao et al., 2009), which contributes to fo-
cal firms’ green exploitative innovation and green exploratory in-
novation. Conversely, when the relational governance between fo-
cal firms and its customers well exceeds the contractual gover-
nance, the cooperative relationship is not steady owing to infor-
mal limits of RG although RG has lower transaction (Sheng et al.,
2018; Hendrikse et al., 2015; Poppo and Zenger, 2002). Both BD
and CD are essential parts of ambidexterity contruct (Cao et al.,
2009; Junni et al., 2013).While BD and CD dimensions contribute to
green innovation or perfomance, they do so through distinct pro-
cess (Cao et al., 2009). Furthermore, BD and CD are more likely to
promote persistent information search (Kiss et al., 2020). In turn,
the persistent information search activities are associated with
green innovation (Arfi et al., 2018). Therefore, it may cause the
focal firms to obtain incomplete second-hand information or re-
sources from its customers, which is not conductive to focal firms’
green exploitative innovation and green exploratory innovation in
face of crucial market and technological change (Cao et al., 2009).
In addition, the interests of the focal firms and its customers can-
not be guaranteed under this situation (Sheng et al., 2018).
Furthermore, when the focal firms and its customers overem-
phasize contractual governance to the exclusion of relational gov-
ernance, the existing trust may be undermined and thus pro-
mote opportunism (Sheng et al., 2018; Ghoshal and Moran, 1996),
even leading to more contradictions and conflicts between the two
sides. TCE suggest that opportunism leads to an increase in trans-
 Y. Zhao, X. Zhang and W. Jiang et al. / Sustainable Production and Consumption 25 (2021) 271–284
action costs (Williamson, 1993). In consequence, more contractual
governance would influence the information exchange between the
focal firm and its customers (Ferguson et al., 2005), which will de-
crease the exchange of green information and resources with cus-
tomers and descend the green exploitative innovation and green
exploratory innovation of a focal firm.
To sum up, relational governance and contractual governance
between focal firms and its customers should be seen as sub-
stitutes and achieve a close balance. The failure to achieve a
small distance between relational governance and contractual gov-
ernance can destroy the partnership of two sides to some ex-
tent and influence the exchange behavior, which is not conductive
to green exploitative innovation and green exploratory innovation.
Therefore, we propose:
H3a. BD strengthens the effect of second-order social capital from
customers on green exploitative innovation.
H4a. BD strengthens the effect of second-order social capital from
customers on green exploratory innovation.
Similarly, direct suppliers occupy an average central position
or have high average network density in its social capital, the di-
rect suppliers can obtain important and integrated information and
validate the reliability of information. When the relational gover-
nance between focal firms and its suppliers well exceeds the con-
tractual governance, information exchange is conducted between
a focal firm and suppliers based on mutual trust, thus both par-
ties can obtain external information at a lower cost (Sheng et al.,
2018). Furthermore, because the cost of obtaining information is
relatively low, the focal firm and suppliers are willing to share
information and Fig. out problems together for building mutual
benefits (Gundlach et al., 1993; Zhao, 2008), which may promote
green exploitative innovation and green exploratory innovation.
More relational governance can reduce opportunism and informa-
tion asymmetry (Abdi and Aulakh, 2017), which can ensure the re-
ality and accuracy of the second-hand information and resources
obtained from focal firms’ suppliers, then promoting the green ex-
ploitative innovation and green exploratory innovation. In addition,
relational governance is positively correlated with exchange per-
formance (Ferguson et al., 2005). Chinese are motivated to build
“guanxi” with their supply chain partners to develop trust, which
provides them with more access to the tacit knowledge and green
information from their suppliers such as market trends and envi-
ronmental technologies (Yang et al., 2012). Especially, a focal firm
from emerging market is strongly motivated to build relationship
with its suppliers through cooperation, such as solving problems
together and helping each other (Peng et al., 2003). Thus, the
closer relationship of the focal firm and its suppliers may con-
tribute to green exploitative innovation and green exploratory in-
novation.
Furthermore, when the focal firms and its suppliers overem-
phasize contractual governance to the exclusion of relational gov-
ernance, formal contract settles a mutual understanding about
a different aspect of the partnership (Ariño and Ring, 2010).
Formal contracts are established to reduce risk and uncertainty
in exchange (Sheng et al., 2018). More contractual governance
can guarantee that the initial stages of exchange are successful
(Lumineau and Henderson, 2012; Poppo and Zenger, 2002). So
more contractual governance can guarantee the cooperation rela-
tion between the focal firm and its suppliers, which is conductive
to develop the focal firm green exploitative innovation and green
exploratory innovation. Therefore, we assume that:
H3b. BD weakens the effect of second-order social capital from sup-
pliers on green exploitative innovation.
275
H4b. BD weakens the effect of second-order social capital from sup-
pliers on green exploratory innovation.
2.5.2. The moderating role of the CD of governance ambidexterity
The center of definition of CD is the idea that relational gov-
ernance and contractual governance may be seen as complements
(Abdi and Aulakh, 2017; Poppo and Zenger, 2002). When the fo-
cal firm interacts with its customers, the focal firm not only needs
to meet customers’ need, but also maintain the trust relation-
ship between the two (Payne and Frow, 2013). If relational gov-
ernance and contractual governance are adopted for the focal firm
and customers, trust between the two sides may be damaged, as
contractual governance may signal distrust of the exchange part-
ners (Sheng et al., 2018; Ghoshal et al., 1996). When two par-
ties adopt relational governance, contractual governance may in-
crease transaction costs and even have side effect on the part-
nership (Poppo and Zenger, 2002). Therefore, the focal firm and
its customers simultaneously implement relational governance and
contractual governance, which is not conductive to the cooperation
between the focal firm and customers. Either relational governance
removes the necessity for contractual governance, or contractual
governance hinders the formation of relational governance directly.
In the process of cooperating with customers, relational gover-
nance promotes information sharing and fosters trust (Sheng et al.,
2018). If direct customers occupy an average central position or
have high average network density in its social capital, the di-
rect customers can control and acquire valuable information or
resources. Relational governance facilitates customers to share in-
formation from customers’ social capital, which is conductive to
green exploitative innovation and green exploratory innovation.
There is a high level of relational governance between the focal
firm and customers, which reduce opportunism and information
asymmetry, thereby reducing transaction costs (Cao et al., 2015,
2018; Ferguson et al., 2005). Therefore, customers will become
more willing to share goals and obtained information with the
focal firm, which will promote the focal firm green exploitative
innovation and green exploratory innovation. Furthermore, there
are exchange hazards between the focal firm and its customers,
the either governance choice in isolation may bring higher ex-
change performance than the combination of relational governance
and contractual governance (Poppo and Zenger, 2002), and rela-
tional governance is more effective than contractual governance to
address exchange hazards (Cao et al., 2018). In addition, Chinese
are motivated to build “guanxi” with their customers to develop
trust, which provides the focal firm with more access to the tacit
knowledge such as market trends and environmental technologies
(Yang et al., 2012). Therefore, relational governance and contractual
governance may be not complementary for the relationship of the
focal firm and its customers. Thus, we propose that:
H5a. CD weakens the effect of second-order social capital from cus-
tomers on green exploitative innovation.
H6a. CD weakens the effect of second-order social capital from cus-
tomers on green exploratory innovation.
While, direct suppliers occupy an average central position or
have high average network density in its social capital, the di-
rect suppliers can obtain important and integrated information
and validate the reliability of information. When the focal firm
cooperates with its suppliers, contractual governance and rela-
tional governance are two main mechanisms to ensure informa-
tion exchange and reduce potential opportunism in the process
of exchanging (Johnson and Sohi, 2016; Poppo and Zenger, 2002).
Contractual governance stresses the use of a formal contract to
regulate the inter-organization cooperation relationship (Lu and
Guo, 2015; Ferguson et al., 2005). Relational governance focuses on
276 Y. Zhao, X. Zhang and W. Jiang et al. / Sustainable Production and Consumption 25 (2021) 271–284
the use of common social norms to guide exchange partners’ be-
haviors (Sheng et al., 2018; Zhou and Xu, 2012). Contractual gover-
nance provides constraints for cooperative project, and relational
governance can decrease the contract constraints (Lioliou et al.,
2014; Lu and Guo, 2015; Poppo and Zenger, 2002). Furthermore,
the process of making a contract needs information exchange be-
tween the focal firm and its suppliers. With the relational develop-
ment, previous experience may be considered in the new contract,
thus improving the quality of the new contract (Lu and Guo, 2015).
Otherwise, relational governance promotes information exchange,
thus facilitating to achieve the goals of contractual governance
(Huber and Fischer, 2013).
In an analogous manner, contractual governance makes up for
the informal limitation of relational governance and facilitates
the development of RG (Huber and Fischer, 2013; Poppo and
Zenger, 2002). In addition, the process of setting up a contract
may promote cooperative goals, which is consistent with relational
governance. Thus, contractual governance promotes relational gov-
ernance in exchange and relational governance can refine con-
tracts and promote the stability of inter-organizational exchanges
(Lioliou et al., 2014).
In a word, the combination of relational governance and con-
tractual governance may provide higher exchange performance
than a separate governance mechanism. Due to the complemen-
tarity, the cooperation relationship is closer between the focal firm
and its suppliers (Cao and Lumineau, 2015). The closer cooperation
relationship promotes green information sharing and exchanging
between the two, which contributes to the development of green
exploitative innovation and green exploratory innovation. Thus, we
hypothesize that:
H5b. CD strengthens the effect of second-order social capital from
suppliers on green exploitative innovation.
H6b. CD strengthens the effect of second-order social capital from
suppliers on green exploratory innovation.
3. Methods
3.1. Sample and data collection
To eliminate the differences between industries, we collected
survey data from different manufacturing industries. These man-
ufacturing companies come from some provinces in China which
including Shandong, Henan, Shaanxi, Guangdong, Jiangsu, Inner
Mongolia. These six provinces indicate different conditions of man-
ufacturing development and market economy in China, so they are
more appropriate. Guangdong and Jiangsu are located in the afflu-
ent Pearl River Delta and Yangtze River Delta respectively, and they
reflect a higher level of economic development in China. Shandong
is located in Bohai Coastal Region, reflecting the average level of
economic development in China. Shaanxi is located in Northwest
China and is an industrial base in western China. Henan is located
in the Midland regions, which reflects a low level of economic de-
velopment. Inner Mongolia is located in the northern region, strad-
dling China’s northeast and northwest regions, and its level of eco-
nomic development and market formation is relatively low. The
samples from these regions largely represent Chinese manufactur-
ing firms. By selecting samples from different geographical regions
of China, we minimized the potential impact of regional biases.
Data is collected main through three steps. First, we designed
a questionnaire based on existing research (Appendix A), and con-
sulted with professional researchers and senior executives to mod-
ify the questionnaire in order to make it more appropriate to the
context of China. Before a formal survey, we randomly selected
eight representative firms to conduct a pilot test. This step was
used to ensure the clarity and conciseness of the scale items. We
interviewed senior or middle managers of the focal firms, and their
answers were excluded from the final analysis. In the process of
interviewing, these respondents were asked to finish the question-
naire and offer some proposes on the design of questionnaire. Ac-
cording to their feedback, we further modified the questionnaire.
We initially designed the questionnaire in English and used trans-
lated and back-translation approach. The questionnaire was modi-
fied until there was no significant difference between the two ver-
sions of the scale and the meaning of the items.
Second, the companies in the sample were selected on the ad-
vice of local universities and governments to ensure the accuracy
and reality of the answers (Feng et al., 2010). Before the formal sur-
vey we made a telephone inquiry to ask if we could investigate to
improve the response rate. If a firm has no relationship with sup-
pliers or customers in its green innovation, it was not be included
in the sample. To encourage them to participate in our survey, we
promised to provide the sampled firms with a report on the im-
provement of the firm. Finally, we sent questionnaires with a cover
letter to 500 firms. To increase response rate, two reminder emails
or calls were sent out at two-week intervals.
We received 242 responses in 500 firms. Because of obtaining
incomplete responses, thirty questionnaires were discarded, which
resulted in receiving 212 valid questionnaires. The response rate
was 48.4%, which was similar to the exiting empirical studies in
this field (Jabbour et al., 2015; Shu et al., 2016). Table 3 shows the
demographic characteristics of the sample, implying that they are
well represented in the industry. The average firm age of the sam-
ples is 10.43 years and the S.D is 10.28, the average number of em-
ployees of the samples is 244.79 and the S.D is 291.56. The samples
are largely representative of the local economic development and
marketization in China.
One of the issues raised with survey method is the non-
response bias. We compared differences in number of employ-
ees, total assets and annual sales between the early and late re-
sponses (Armstrong and Overton, 1977). Our t-test findings show
that there were no statistical differences among the three charac-
teristics. Therefore, we can conclude that ther is not serious non-
response bias in this research.
As we acquired cross-sectional data from a single informant,
there might be common method bias (CMB) threating the jus-
tifiability of results (Wong et al., 2011). We examined the pos-
sibility of CMB. First, we conducted Harman’s one-factor test
(Podsakoff et al., 2003; Podsakoff and Organ, 1986). Harman’s one-
factor test suggested that there are six factors with eigenvalues
above or near 1.0, explaining 72.67% of the total variance. There is
no factor accounting for most of the total variance. Second, we per-
formed confirmatory factor analysis (CFA) for Harman’s one-factor
test (Podsakoff et al., 2003). The fit shows that the variables have
several distinct factors, which suggests that CMB problem is not
an issue. The one factor model yielded χ 2 (560) = 3,195.83, com-
pared with χ 2 (510) = 915.48 for the CFA model. In addition, we
also segmented the survey items used in this research into differ-
ent sections of the questionnaire, which can alleviate the influence
of CMB (Podsakoff et al., 2003).
3.2. Measures
The survey questions of constructs were conducted on five-
point Likert scales (1 = strongly disagree and 5 = strongly agree).
The measurement items of constructs are presented in appendix A.
3.2.1. SSC from customers
SSC from customers was measured by average network cen-
trality and average network density of customers (Galunic et al.,
2012). Average network centrality of customers is measured with
four items adapted from Antia and Frazier (2001). Sample items
 Y. Zhao, X. Zhang and W. Jiang et al. / Sustainable Production and Consumption 25 (2021) 271–284 277

Table 3
Profile of sampled firms.

Characteristics of samples Frequency Percentage (%)

Positions of respondents
President/CEO/ 34 16.0
Senior managers 90 42.5
Middle-level managers 59 27.8
Low-level managers 29 13.7
Industry
Rubber, plastics and non-metallic mineral products 40 18.9
Chemical and pharmaceutical products 24 11.3
Metal products 22 10.4
Transport equipment 22 10.4
Electrical machinery and equipment 21 9.9
Food products 21 9.9
Instruments and related products 18 8.5
Machinery 15 7.1
Others manufacturing industries 29 13.7
Number of employees
Less than 50 81 38.2
50-100 45 21.3
100-300 27 12.7
300-500 11 5.2
No less than 500 48 22.6
Ownership
State-owned 46 21.7
Privately-owned 158 74.5
Foreign-invested 8 3.8

include “The main customers are intermediaries for technical ex-
changes between other companies in the same industry” and “The
change of business behavior or strategy of our major customers has
a great impact on other companies in the same industry”. Average
network density of customers is measured with four items adapted
from Marsden (1990) and Uzzi (1997). Sample items include “The
relationship between the partners of our main customer shall be
established mainly through our customer” and “Our primary cus-
tomers are more closely related to other members of the industry
than to its competitors in the same industry”.
3.2.2. SSC from suppliers
SSC from suppliers was measured by average network centrality
and average network density of suppliers (Galunic et al., 2012). Av-
erage network centrality of suppliers is measured with three items
adapted from Antia and Frazier (2001). Sample items include “Most
peer companies of our major suppliers know the technical capabil-
ities and products of our major suppliers” and “Our main suppli-
ers are intermediaries for technical exchanges between other en-
terprises in the same industry”. Average network density of suppli-
ers is measured with four items adapted from Marsden (1990) and
Uzzi (1997). Sample items include “Our major suppliers have many
direct contacts with their partners” and “Our primary suppliers are
more closely related to other members of the industry than to its
competitors in the same industry”.
3.2.3. Relational governance and contractual governance
Governance ambidexterity is a comprehensive construct of re-
lational governance and contractual governance, and therefore, our
measures of BD and CD are based on fundamental measures of
relational governance and contractual governance. To access rela-
tional governance and contractual governance, we used the scale
from Ferguson et al. (2005) and Claro et al. (2003). Example items
for relational governance include “We adopt terms that are fair to
our partners”, “We do business with our partners on the basis of
mutual benefit and trust”and “We believe that our partners can
provide accurate information in time”. Example items for contrac-
tual governance include “The rules and regulations in the coop-
eration contract specify the relationship between the parties” and
“The cooperation contract can adapt to the specific needs of us and
our partners”.
3.2.4. BD and CD
BD is related to the balance, or relative dimension of relational
governance and contractual governance. To actualize BD, we fol-
low Cao and Gedajlovic (2009) and He and Wong (2004) treat-
ment and use the absolute difference between relational gover-
nance and contractual governance. Then using 6 to subtract the ab-
solute difference to measure BD, thus a higher value means greater
BD. CD is related to a firm’s combined magnitudes of relational
governance and contractual governance. We follow Cao and Geda-
jlovic (2009) and He and Wong (2004) treatment and multiply re-
lational governance and contractual governance to operationalize
CD.
3.2.5. Green exploitative innovation and green exploratory innovation
The five items used to measure green exploitative innovation
were adapted from Fernhaber et al. (2012). Sample items include
“We usually strive to improve the environmental quality of our ex-
isting products (services)”and “We always strive to provide more
and better supporting services for existing green and environment-
friendly products”. The five items that were used to measure green
exploratory innovation were adapted from Fernhaber et al. (2012).
Example items include “We often try to create or introduce new
green products (services)”and “we often try to introduce new en-
vironmental protection technology”.
3.2.6. Control variables
We also included several control variables in the model, such
as industrial type, firm size, firm age, ownership type and environ-
mental dynamics (i.e., market dynamics and technical dynamics).
The first control variable is industrial type. It was measured with
a dummy variable (1 = high-tech firm and 0 = others). Firm size
was measured by taking the natural logarithm of the number of
employees. Ownership type was measured using two dummy vari-
ables (the first dummy: 1 = state-owned enterprises and 0 = oth-
ers, the second dummy: 1 = private enterprises and 0 = others).
We also included environmental dynamics that divided into mar-
ket dynamics and technical dynamics. We used ten items adapted
278 Y. Zhao, X. Zhang and W. Jiang et al. / Sustainable Production and Consumption 25 (2021) 271–284

Table 4
Construct reliability and validity analysis.

Factor Cronbach’s Composite

Construct Item code loading alpha reliability

Second-order social capital from SSCC1 0.701 0.898 0.901

customers (SSCC) SSCC2 0.766
SSCC3 0.801
SSCC4 0.776
SSCC5 0.736
SSCC6 0.757
SSCC7 0.802
SSCC8 0.770
Second-order social capital from SSCS1 0.789 0.871 0.868
suppliers (SSCS) SSCS2 0.813
SSCS3 0.762
SSCS4 0.682
SSCS5 0.716
SSCS6 0.764
SSCS7 0.724
Relational governance (RG) RG1 0.880 0.945 0.938
RG2 0.892
RG3 0.895
RG4 0.854
RG5 0.908
RG6 0.889
Contractual governance (CG) CG1 0.854 0.908 0.908
CG2 0.885
CG3 0.903
CG4 0.897
Green exploitative innovation (GTI) GTI1 0.897 0.937 0.926
GTI2 0.906
GTI3 0.889
GTI4 0.877
GTI5 0.902
Green exploratory innovation (GRI) GRI1 0.908 0.938 0.938
GRI2 0.902
GRI3 0.895
GRI4 0.883
GRI5 0.888

from Jansen et al. (2006) to measure market dynamics and tech-
nical dynamics. Example items for market dynamics included “Our
industry has a high degree of market turbulence” and “the prod-
ucts and services in the industry are increasingly diversified”. Ex-
ample items for technical dynamics included “Our industry has a
high degree of technological innovation turbulence” and “Newer
technologies can help us develop new products and services”.
3.3. Reliability and validity
First, the reliability of the constructs was measured by Cron-
bach’s alpha and composite reliability. One item of measuring the
second-order social capital from suppliers has not passed the relia-
bility test and has been deleted. As indicated in Table 3, Cronbach’s
alpha and composite reliability are greater than 0.70 for all the
constructs, implying the reliability of the constructs (Flynn et al.,
1990). Then we use varimax rotation for exploratory factor anal-
ysis (EFA) to assess the measurement model. EFA results generate
six factors, which explain 72.67% of the total variance. Moreover,
all items are significantly loaded on their supposed constructs, in-
dicating unidimensionality is good (Table 4).
Next, we assessed the validity of the measurement items. We
established content validity by developing scale items based on ex-
isting literature. We conducted CFA to examine the convergent va-
lidity. The measurement model was satisfactory (χ 2 (510) = 915.48;
Root Mean Square Error of Approximation (RMSEA = 0.061;
CFI = 0.936; NNFI = 0.926; Standardized Root Mean Square Resid-
ual (SRMR) = 0.051) (Hu and Bentler, 1999). Average variance ex-
tracted (AVE) values range from 0.704 to 0.866. To examine dis-
criminant validity, we compared the squared correlations with the
AVEs of all pairs of latent constructs (Bagozzi, 1981). Table 5 shows
the square root of AVE of each construct is greater that the corre-
lations between this construct and other constructs. As a result,
discriminant validity is ensured.
In Table 5, the correlation coefficients between constructs are
lower than the threshold value of 0.9 (Hair et al., 1998), indicat-
ing not serious multicollinearity. Further, this study checked the
potential multicollinearity using the variance inflation factor (VIF)
(Hair et al., 1998). All the VIF values are smaller than the cut-off
value of 10, further demonstrating that multicollinearity is not se-
rious (Neter et al., 1996).
4. Analysis Results
Tables 6 and 7 show the regression analysis results. Model 1
only includes control variables. Model 2a includes the main effect
of SSC from suppliers only. Model 2b examines the main effect
of SSC from customers. Model 2c includes the main effect of SSC
from suppliers and SSC from customers. Model 3a adds the moder-
ating variables: relational governance, contractual governance, BD,
CD. Model 3b adds the interaction terms based on Model 3a. We
mean centered predictors and moderators before establishing in-
teraction terms to decrease the potential effect of multicollinearity
(Aiken and West, 1991).
We hypothesize that SSC from customers has positive impacts
on green exploitative innovation and green exploratory innova-
tion. The result in Model 2a from Table 6 suggests that SSC from
customers is significantly and positively related to green exploita-
tive innovation (β = 0.465, p < 0.001) and in Model 2a from
Table 7 suggests that SSC from customers is significantly and pos-
itively related to green exploratory innovation (β = 0.360, p <
0.001), providing support for H1. The result in Model 2b from
 Y. Zhao, X. Zhang and W. Jiang et al. / Sustainable Production and Consumption 25 (2021) 271–284 279

Table 5
Mean, standard deviations and correlations of the constructs.

Constructs Mean SD 1 2 3 4 5 6

1. Second-order social capital from customers 3.613 0.735 0.732

2. Second-order social capital from suppliers 3.583 0.706 0.741∗ ∗ 0.704
3. Relational governance 4.119 0.803 0.471∗ ∗ 0.492∗ ∗ 0.859
4. Contractual governance 4.019 0.823 0.482∗ ∗ 0.455∗ ∗ 0.810∗ ∗ 0.844
5. Green exploitative innovation 4.046 0.886 0.553∗ ∗ 0.459∗ ∗ 0.642∗ ∗ 0.638∗ ∗ 0.861
6. Green exploratory innovation 3.931 0.828 0.484∗ ∗ 0.441∗ ∗ 0.655∗ ∗ 0.617∗ ∗ 0.694∗ ∗ 0.866
∗∗
Note: Significance at the.01 level; the diagonal elements in bold are the square root of average variance extracted (AVE).

Table 6
Regression analysis results of green exploitative innovation.

Variable Model 1 Model 2a Model 2b Model 2c Model 3a Model 3b

Control variables
Industrial type 0.042 0.047 0.042 0.047 0.031 0.016
Firm size 0.093 0.014 0.010 0.011 −0.001 0.013
State-owned enterprises 0.030 −0.034 −0.025 −0.036 −0.061 −0.073
Private enterprises −0.039 −0.082 −0.070 −0.083 −0.067 −0.053
Firm age −0.026 0.029 0.011 0.030 0.010 −0.003
Market dynamics 0.093 0.033 −0.006 0.028 0.049 0.043
Technical dynamics 0.361∗ ∗ ∗ 0.198∗ ∗ 0.243∗ ∗ 0.195∗ ∗ 0.050 0.047
Independent variables
Second-order social capital from customers (SSCC) 0.465∗ ∗ ∗ 0.449∗ ∗ ∗ 0.311∗ ∗ ∗ 0.294∗ ∗ ∗
Second-order social capital from suppliers (SSCS) 0.349∗ ∗ ∗ 0.026 −0.079 −0.073
Moderators
Relational governance 0.285∗ ∗ 0.300∗ ∗
Contractual governance 0.213∗ 0.213∗
Balanced dimension of ambidexterity (BD) 0.040 0.066
combined dimension of ambidexterity (CD) −0.104+ −0.124
Interaction effects
SSCC × BD 0.109
SSCS × BD −0.108
SSCC × CD −0.571∗ ∗
SSCS × CD 0.573∗ ∗
R2 0.176 0.348 0.259 0.348 0.532 0.552
R 2 0.172 0.083 0.172 0.184 0.020
F change for R2 53.440∗ ∗ ∗ 22.789∗ ∗ ∗ 26.639∗ ∗ ∗ 19.414∗ ∗ ∗ 2.226+

Note: +Significance at the 0.10 level; ∗ significance at the .05 level; ∗∗

significance at the 0.01 level; ∗∗∗
significance at the 0.001 level.

Table 7
Regression analysis results of green exploratory innovation.

Variable Model 1 Model 2a Model 2b Model 2c Model 3a Model 3b

Control variables
Industrial type −0.006 −0.002 −0.006 −0.003 −0.015 −0.025
Firm size 0.103 0.042 0.031 0.031 0.023 0.040
State−owned enterprises −0.044 −0.094 −0.092 −0.100 −0.118 −0.112
Private enterprises −0.166+ −0.199∗ −0.193∗ −0.202∗ −0.181∗ −0.157+
Firm age −0.018 0.025 0.014 0.028 0.005 0.001
Market dynamics 0.040 −0.006 −0.046 −0.023 −0.003 0.006
Technical dynamics 0.453∗ ∗ ∗ 0.327∗ ∗ ∗ 0.351∗ ∗ ∗ 0.317∗ ∗ ∗ 0.175∗ ∗ 0.170∗ ∗
Independent variables
Second−order social capital from customers (SSCC) 0.360∗ ∗ ∗ 0.310∗ ∗ ∗ 0.176∗ 0.176∗
Second−order social capital from suppliers (SSCS) 0.304∗ ∗ ∗ 0.081 −0.026 −0.032
Moderators
Relational governance 0.337∗ ∗ ∗ 0.327∗ ∗ ∗
Contractual governance 0.167+ 0.191∗
Balanced dimension of ambidexterity (BD) 0.009 −0.016
Combined dimension of ambidexterity (CD) −0.093 −0.091
Interaction effects
SSCC × BD 0.136+
SSCS × BD −0.191∗
SSCC × CD −0.279
SSCS × CD 0.298
R2 0.233 0.335 0.296 0.338 0.521 0.535
R 2 0.102 0.063 0.105 0.183 0.014
F change for R2 31.344∗ ∗ ∗ 18.146∗ ∗ ∗ 16.035∗ ∗ ∗ 18.881∗ ∗ ∗ 1.487

Note: +Significance at the 0.10 level; ∗ significance at the 0.05 level; ∗∗

significance at the 0.01 level; ∗∗∗
significance at the 0.001 level.
280 Y. Zhao, X. Zhang and W. Jiang et al. / Sustainable Production and Consumption 25 (2021) 271–284

Fig. 3. Moderating effect of balanced dimension on second-order social capital from

Fig. 2. Moderating effect of balanced dimension on second-order social capital from
suppliers.
customers.

Table 6 suggests that SSC from suppliers is significantly and pos-

itively related to green exploitative innovation (β = 0.349, p <
0.001) and in Model 2b from Table 7 suggests that SSC from sup-
pliers is significantly and positively related to green exploratory in-
novation (β = 0.304, p < 0.001). Thus, H2 is supported.
H3a proposes that BD strengthens the effect of SSC from cus-
tomers on green exploitative innovation. The result in Model 3b
from Table 6 suggests that the impact of the interaction term
between BD and SSC from customers is positive and insignifi-
cant (β = 0.109, p > 0.10). Thus, the result does not support
H3a. H3b proposed that BD weakens the effect of SSC from sup-
pliers on green exploitative innovation. The result in Model 3b
from Table 6 suggests that the impact of the interaction term be-
tween BD and SSC from suppliers is negative and insignificant
(β = −0.108, p > 0.10). Thus, the result does not support H3b.
H4a proposes that BD strengthens the relationship between SSC
from customers and green exploratory innovation. The result in Fig. 4. Moderating effect of combined dimension on second-order social capital
Model 3b from Table 7 suggests that the impact of the interaction from customers.

term between BD and SSC from customers is positive and signifi-

cant (β = 0.136, p < 0.10). The plot of the BD∗ SSC from customers
interaction (Fig. 2) indicates that while BD is higher, the positive
effect of SSC from customers on green exploratory innovation is
more significant. H4b proposes that BD weakens the relationship
between SSC from suppliers and green exploratory innovation. The
result in Model 3b from Table 7 suggests that the impact of the in-
teraction term between BD and SSC from suppliers is negative and
significant (β = −0.191, p < 0.05). The plot of the BD∗ SSC from
suppliers interaction (Fig. 3) indicates that while BD is lower, the
positive effect of SSC from suppliers on green exploratory inno-
vation is more significant. Following Aiken and West (1991), we
further examined the details of the moderating effects. We pre-
sented the results in Figs. 2 and 3. When the level of BD is high,
the impact of SSC from customers on green exploratory innovation
is insignificant (β = 0.312, p > 0.10). When the level of BD is low,
the impact of SSC from customers on green exploratory innova-
tion is insignificant (β = 0.040, p > 0.10). When the level of BD is
high, the impact of SSC from suppliers on green exploratory inno-
vation is negative and insignificant (β = −0.223, p > 0.10). When
the level of BD is low, the impact of SSC from suppliers on green
exploration innovation is positive and insignificant (β = 0.159, p >
0.10). Thus, the result supports H4a and H4b.
H5a proposes that CD weakens the effect of SSC from cus-
tomers and green exploitative innovation. The result in Model 3b
from Table 6 suggests that the impact of the interaction term
between CD and SSC from customers is negative and significant
(β = −0.571, p < 0.05). The plot of the CD∗ SSC from customers
interaction (Fig. 4) indicates that while CD is lower, the positive
effect of SSC from customers on green exploitative innovation is
more significant. H5b proposes that CD strengthens the effect of
SSC from suppliers on green exploitative innovation. The result in
Model 3b from Table 6 suggests that the impact of the interaction
term between CD and SSC from suppliers is positive and signifi-
cant (β = 0.573, p < 0.05). The plot of the CD∗ SSC from suppli-
ers interaction (Fig. 5) indicates that while CD is higher, the posi-
tive effect of SSC from customers on green exploitative innovation
is more significant. The results of regression slope coefficients are
showed in Figs. 4 and 5. When the level of CD is high, the impact
of SSC from customers on green exploitative innovation is insignif-
icant (β = −0.277, p > 0.10), whereas it is significant (β = 0.865,
p < 0.001) when the level of CD is low. When the level of CD is
high, the impact of SSC from suppliers on green exploitative inno-
vation is positively significant (β = 0.500, p < 0.05), whereas it is
negatively significant (β = −0.646, p > 0.10) when the level of CD
is low. Thus, our results support H5a and H5b.
H6a proposes that CD weakens the effect of SSC from cus-
tomers on green exploratory innovation. The result in Model 3b
from Table 7 suggests that the impact of the interaction term be-
tween CD and SSC from customers is negative and insignificant
(β = 0.279, p > 0.10). Thus, the result does not support H6a.
H6b proposes that CD strengthens the effect of SSC from suppli-
ers on green exploratory innovation. The result in Model 3b from
Table 7 suggests that the impact of the interaction term between
 Y. Zhao, X. Zhang and W. Jiang et al. / Sustainable Production and Consumption 25 (2021) 271–284
Fig. 5. Moderating effect of combined dimension on second-order social capital
from suppliers.
CD and SSC from suppliers is positive and insignificant (β = 0.298,
p > 0.10). Thus, the result does not support H6b.
5. Discussion
5.1. Discussion of the results
Previous literature about green innovation and supply chain
management has emphasized the significance of green innovation
in enhancing performance (Li et al., 2018). Although there are
many factors that affect the firm’s green innovation, previous re-
search seldomly considered the firm’s SSC to green innovation. In
this research, we explore the influence of firm’s SSC on green ex-
ploitative and exploratory innovation, as well as the moderating
role of BD and CD of governance ambidexterity base on SET. Our
study collapses firms’ SSC into SSC from customers and SSC from
suppliers and illustrates the positive impacts of the two dimen-
sions on green exploitative and exploratory innovation. This result
shows that firms’ SSC plays a critical role in green exploitative and
exploratory innovation. Therefore, this study reinforces the neces-
sity of SSC to realize green exploitative innovation and green ex-
ploratory innovation.
Both SSC from customers and SSC from suppliers are positively
related to green exploitative innovation and green exploratory in-
novation. In fact, the suppliers and customers are regarded as the
role of brokers who gather green information and resources from
their social capital, then they would send information and resource
to the foal firm of the supply chain for mutual benefits based on
SET (Flynn and Huo, 2010). Information of second-order social cap-
ital from customers may present the accurate final customer needs
and preference, it may help the focal firm to decide the orientation
of green innovation (Feng et al., 2019). Information of second-order
social capital from suppliers would indicate the relative product
specification, parts and components, which may be crucial for a
focal firm to develop green innovation (Un et al., 2010).
This study further examines the moderating effect of BD and CD
of governance ambidexterity on the effect between SSC and green
innovation. It is noteworthy that the focal firm needs to adopt dif-
ferent governance methods for its customers and suppliers when
the firm aims to promote green innovation. The results indicate
that the CD of governance ambidexterity strengthens the positive
effect of SSC from suppliers and green exploitative innovation and
the CD of governance ambidexterity weakens the positive effect of
SSC from customers and green exploitative innovation. SSC from
suppliers have greater impact on green exploitative innovation un-
der a higher level of CD of governance ambidexterity. It means the
281
focal firm could adopt relational governance and contractual gover-
nance at the same time with its suppliers and maximize combined
magnitude when the focal firm wants to develop green exploita-
tive innovation. However, the results indicate that the BD of gov-
ernance ambidexterity strengthens the positive effect of SSC from
customers and green exploratory innovation and the BD of gover-
nance ambidexterity weakens the positive effect of SSC from sup-
pliers and green exploratory innovation. SSC from customers has
greater impact on green exploratory innovation under a higher
level of BD of governance ambidexterity. It means that the focal
firm maintains a close and small distance between relational gov-
ernance and contractual governance with its customers when the
focal firm carries out green exploratory innovation. The results also
show that information from suppliers can promote green exploita-
tive innovation and information from customers can promote green
exploratory innovation. As information from suppliers is related to
extant products, process, schedules and capabilities (Wang et al.,
2016), and information from customers is about customer needs
and preferences (Feng et al., 2019), it may be a new idea about the
product design or production process.
5.2. Theoretical contributions
This research contributes to the existing knowledge system of
social capital and green innovation in three ways. First, this study
adds to our understanding of the value of SSC and enriches the
social capital theory by exploring the impacts of two dimensions
of SSC including SSCC and SSCS on green innovation. The results
show that SSCC and SSCS have positive impact on green innova-
tion. Thus, managers must give attention to the role of second-
order social capital (i.e., SSCS) in enhancing green innovation.
Second, this study contributes to the social exchange theory by
examining the impact of SSC on two dimensions of green innova-
tion (i.e., GTI and GRI). Most studies have only focused on how the
focal firms benefit from SSC on green innovation, whereas green
innovation can be divided into two dimensions, such as GTI and
GRI by considering the degree of innovation processes in new en-
vironmental product development. Our findings show that SSC can
promote green exploitative innovation and green exploratory inno-
vation even if the degree of innovation processes is different.
Third, this study contributes to transaction cost economics by
exploring the moderating effects of two dimensions of governance
ambidexterity including BD and CD on the relationship between
SSC and green innovation. Previous studies have focused on re-
lational governance or contractual governance respectively, which
lacks a comprehensive governance method. Thus, our findings con-
tribute to the governance literature by showing that BD and CD de-
pend on different machanisms to moderate the effect of SSD and
green innovation. BD strengthens the effect of second-order social
capital from customers on green innovation and CD strengthens
the effect of second-order social capital from suppliers on green
innovation.
5.3. Managerial implications
Our study indicates that firms striving to improve green inno-
vation should attach importance to SSC of a firm. Through SSC
from customers, firms can obtain accurate customer need and pref-
erence information (Lynch and O’Toole, 2016). Through SSC from
suppliers, firms can get significant and new material and envi-
ronmental protection technologies information quickly (Kim et al.,
2011). However, in the implementation of green innovation, com-
panies do not fully obtain external information and resource,
which often leads to the failure of green innovation. Thus, firms
should pay attention to first-order social capital, but also mainly
SSC when carrying out green innovation. Our finding suggests that
282 Y. Zhao, X. Zhang and W. Jiang et al. / Sustainable Production and Consumption 25 (2021) 271–284
both SSC from customers and SSC from suppliers are crucial. There-
fore, firms should maintain their business relationship with their
long-term suppliers and customers to obtain more SSC.
The focus on relationship of a firm and its suppliers or cus-
tomers provides a new perspective for managers. Most managers
probably believe that only adopting relational governance or con-
tractual governance with their partners is enough, but our find-
ing indicates that the focal firm should adopt suitable governance
mechanism with their partners according to different targets of in-
novation. For example, if a firm develops green exploitative inno-
vation, it could adopt relational governance and contractual gover-
nance simultaneously to guarantee the close cooperation relation-
ship.
6. Conclusions
This study broadens the perspective of social capital and ex-
plores how SSC of a firm influences green innovation and the mod-
erating role of BD and CD of governance ambidexterity. We find
that both SSC from customers and suppliers are positively related
to green exploitative and exploration innovation. We also find that
the BD of governance ambidexterity strengthens the effect of SSC
from customers on green exploratory innovation while the BD of
governance ambidexterity weakens the positive effect of SSC from
suppliers on green exploratory innovation. In addition, the CD of
governance ambidexterity strengthens the effect of SSC from sup-
pliers on green exploitative innovation while the CD of governance
ambidexterity weakens the effect of SSC from customers on green
exploitative innovation.
There are some limitations in this study, which may guide fu-
ture research directions. First, this study examines the influence of
SSC on green innovation by selecting green innovation as an out-
come variable. The outcome is critical, but future research could
select other outcome variable, such as green product innovation,
green innovation performance, firm performance. This would make
us to better understand the benefits and risks of SSC. Second, this
study does not further investigate intermediary mechanism. There
may be mediators to serve as intermediary mechanism through
which SSC affects green innovation. Future research may provide
new perspectives into the influence mechanism of SSC and green
innovation.
Declaration of Competing Interest
None.
Acknowledgements
This work was partially supported by National Natural Sci-
ence Foundation of China (No. 71702148, No. 71662022), Taishan
Scholar Project of Shandong Province (tsqn201909154), Science
and Technology Program for Innovation of Shandong Universities
(2020RWG003), Social Science Planning Research Project in Shan-
dong Province (19CGLJ03), and Soft Science Research Project in
Shaanxi Province (No. 2020KRM159).
Supplementary materials
Supplementary material associated with this article can be
found, in the online version, at doi:10.1016/j.spc.2020.09.003.
Appendix A. Questionnaire used in the study
Green exploitative innovation (GTI) (Fernhaber S A et al., 2012)
GTI1: We usually strive to improve the environmental quality of our existing
products (services)
GTI2: We always strive to provide more and better supporting services for
existing green and environment-friendly products
GTI3: We often try to reduce the production cost of existing products
(services) by choosing low energy consuming materials
GTI4: We often try to refine the types of green products (services) available
GTI5: We often try to improve the quality of the existing green products
Green exploratory innovation (GRI) (Fernhaber S A et al., 2012)
GRI1: We often try to create or introduce new green products (services)
GRI2: We often try to introduce new environmental protection technology
GRI3: We often try to develop new green products (services) into emerging
markets
GRI4: We often try to adjust our product structure to make our products
(services) more environmentally friendly
GRI5: We often try to improve our business processes to make our products
(services) more environmentally friendly
Second-order social capital from customers (SSCC) (Antia and Frazier, 2001;
Marsden, 1990; Uzzi, 1997)
SSCC 1: Our major customers have many direct relationships with their
partners
SSCC 2: The relationship between the partners of our main customer shall
be established mainly through our customer
SSCC 3: Our primary customers are more closely related to other members
of the industry than to its competitors in the same industry
SSCC 4: Our main customers have a closer relationship with a university or
research institute than its peers
SSCC 5: Most peer companies of our major customers know the technical
capabilities and products of our major customers
SSCC 6: Our main customers are intermediaries for technical exchanges
between other enterprises in the same industry
SSCC 7: Peer companies of our major customers expect our major customers
to provide new knowledge or technologies when they need technical advice
SSCC 8: The change of business behavior or strategy of our major customers
has a great impact on other companies in the same industry
Second-order social capital from suppliers (SSCS) (Antia and Frazier, 2001;
Marsden,1990; Uzzi,1997)
SSCS1: Our major suppliers have many direct contacts with their partners
SSCS2: The relationship between the partners of our main suppliers shall be
established mainly through our suppliers
SSCS3: Our primary suppliers are more closely related to other members of
the industry than to its competitors in the same industry
SSCS4: Our main suppliers have a closer relationship with a university or
research institute than its peers
SSCS5: Most peer companies of our major suppliers know the technical
capabilities and products of our major suppliers
SSCS6: Our main suppliers are intermediaries for technical exchanges
between other enterprises in the same industry
SSCS7: Peer companies of our major suppliers expect our major suppliers to
provide new knowledge or technologies when they need technical advice
SSCS8: The change of business behavior or strategy of our major suppliers
has a great impact on other companies in the same industry∗
Relational governance (RG) (Ferguson et al., 2005; Claro et al., 2003)
RG1: We adopt terms that are fair to our partners
RG2: We do business with our partners on the basis of mutual benefit and
trust
RG3: We believe that our partners can provide accurate information in a
timely manner
RG4: We work with our partners to address the issues that arise in the
partnership
RG5: We help each other with our partners to complete the task of
cooperation
RG6: We work with our partners to improve the overall relationship
Contractual governance (CG) (Ferguson et al., 2005)
CG1: The rules and regulations in the cooperation contract specify the
relationship between the parties
CG2: When there is a dispute with partners, we can find a satisfactory
solution whether it is based on agreement or not
(continued on next page)
 Y. Zhao, X. Zhang and W. Jiang et al. / Sustainable Production and Consumption 25 (2021) 271–284
CG3: The cooperation contract can adapt to the specific needs of us and our
partners
CG4: As the business of partners changes, both will make changes to the
cooperation contract
Market dynamics (MD) (Jansen et al., 2006)
MD1: Our industry has a high degree of market turbulence
MD2: The products and services in the industry are increasingly diversified
MD3: The competition between us and other companies in the industry is
becoming fiercer and fiercer
MD4: Changes in our customers demand and preferences are hard to predict
MD5: The demand of new customers for products and services is obviously
different from that of old customers
Technical dynamics (TD) (Jansen et al., 2006)
TD1: Our industry has a high degree of technological innovation turbulence
TD2: Newer technologies can help us develop new products and services
TD3: It is difficult for us to predict the trend of technology change in three
years
TD4: The generation of innovative technologies can bring great opportunities
to the industry
TD5: Technological changes in the industry will have a great impact on the
production and operation of our companies
Note: ∗
is deleted because reliability of this item does pass threshold value.
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