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Leveraging
Leveraging open innovation open
strategies for fueling eco- innovation
strategies
innovation performance in
dynamic environments 1245
Colin C.J. Cheng Received 9 April 2018
Revised 24 August 2018
Department of Business Administration, National Taipei University, 24 December 2018
New Taipei City, Taiwan, and 13 June 2019
19 August 2019
27 November 2019
Eric C. Shiu Accepted 9 January 2020
Birmingham Business School, University of Birmingham, Birmingham, UK

Abstract
Purpose – Despite the rising interest in eco-innovation, few studies have examined how open innovation
(OI) actually increases eco-innovation performance. Drawing on capabilities theory, this study aims to
investigate how two specific organizational capabilities (alliance management capability and absorptive
capacity) individually complement OI strategies (inbound and outbound) to increase eco-innovation
performance, while taking into consideration high and low levels of environmental uncertainty.
Design/methodology/approach – To test the hypotheses, the authors used a primary survey and
secondary proxy data sources from 232 Taiwan-based manufacturing firms. The authors collected survey
data for measuring OI strategies, followed by secondary proxy data for measuring alliance management
capability, absorptive capacity, environmental uncertainty and eco-innovation performance.
Findings – The results indicate that in highly dynamic environments, alliance management capability
complements inbound/outbound strategies to increase eco-innovation performance. However, absorptive
capacity complements only inbound strategies, not outbound strategies.
Practical implications – These findings have important implications for managers attempting to
increase eco-innovation performance by using OI in dynamic environments.
Social implications – The findings provide new evidence that configurations of OI alone are not enough
for increasing eco-innovation performance. Instead, firms’ eco-innovation benefits more when OI are
complemented by alliance management capability.
Originality/value – This study makes an original contribution to the eco-innovation literature by
demonstrating how organizational capabilities complement OI to increase eco-innovation performance in
dynamic environments.
Keywords Environmental uncertainty, Eco-innovation, Open innovation
Paper type Research paper

1. Introduction
There has been a recent paradigm shift in how firms enhance eco-innovation performance
(García-Granero et al., 2018; Timmermans et al., 2017; Yayavaram and Chen, 2015). Previous
literature has supported eco-innovation differing from other innovations, as far as
externalities are concerned, highlighting the importance of openness to foster eco-innovation Sustainability Accounting,
Management and Policy Journal
(Albort-Morant et al., 2018). As such, the traditional focus on a firm’s own resources has Vol. 11 No. 7, 2020
pp. 1245-1270
given way to a model, such as open innovation (OI), where firms manage inbound and © Emerald Publishing Limited
2040-8021
outbound flows of eco-related knowledge to advance their eco-innovation strategies, by DOI 10.1108/SAMPJ-04-2018-0103
SAMPJ tapping into external resources while simultaneously exploiting internal resources (Behnam
11,7 et al., 2018; Arfi et al., 2018; Ghisetti et al., 2015).
The importance of OI in eco-innovation processes is recognized in eco-innovation
research, including integration of broad and diverse actors in eco-innovation projects
(Behnam et al., 2018), how knowledge-sharing can develop green innovation in small and
medium enterprises (Arfi et al., 2018), management of external eco-knowledge sourcing
1246 (Lopes et al., 2017) and OI in the context of green-technology start-ups (Pakura and Bühler,
2017). Although some studies provide useful conjectures on the importance of OI for eco-
innovation, others suggest that OI may not be as beneficial as previously concluded and
may even hinder innovation. For example, Ghisetti et al. (2015) indicate that OI is essential
for eco-innovation development because knowledge-sharing and knowledge-transfer are
crucial factors of eco-innovation. In contrast, Pakura and Bühler (2017) analyze the data
from expert interviews with ten green-tech start-ups and find that while OI can open up
opportunities for firms, it can simultaneously increase the risk of OI, such as deficiencies in
internal development of critical technological knowledge, reduced possibilities to develop
core competencies based on such knowledge and problems in identifying external sources of
knowledge.
We believe these inconsistencies derive partially from the implicit assumption in
previous studies that organizational capabilities and environmental uncertainty are among
the important factors that affect the relationship between OI and eco-innovation
performance. In terms of organizational capabilities, merely engaging in OI would not
suffice for eco-innovation development; instead, specific organizational capabilities are
needed to complement OI (e.g. OI capabilities, Behnam et al., 2018). In addition, without the
support of proper organizational capabilities, and knowledge acquired from OI simply
touches on shallow surfaces, rather than capturing the essence of an emerging eco-
innovation (Lopes et al., 2017). Therefore, a firm should use specific organizational
capabilities to complement OI for fueling eco-innovation.
As for environmental uncertainty, the value of OI in relation to eco-innovation and
environmental uncertainty has not been properly studied (Zhao et al., 2018; Roper and
Tapinos, 2016). Environmental uncertainty refers to the rate and unpredictability of change
in a firm’s external environment (Davis et al., 2009). Taking the contingency perspective, the
rationale is how firms match their innovation activities with the corresponding
environmental context (Donaldson, 2001). As the external environment is unpredictable, any
firm must adjust its innovation activities (Schilke, 2014). As such, it is unlikely that firms
implementing OI will have similar positive effects in any situation, meaning that the
effectiveness of OI is context-dependent (Chesbrough, 2017; Huizingh, 2011). Particularly,
prior research on OI has indicated that external environmental uncertainty will influence
firms’ benefits from performing OI (Spender et al., 2017; Kim et al., 2015; Hung and Chou,
2013). This is especially relevant in eco-innovation activities (Lo and Shiah, 2016). As
suggested by Wu (2013), the extant eco-innovation research has not properly examined the
effect of environmental uncertainty on the value of a firm’s eco-innovation.
Drawing on capabilities theory (Eisenhardt and Martin, 2000; Helfat and Peteraf, 2015),
this study aims to investigate how specific organizational capabilities complement OI to
increase eco-innovation performance while taking into consideration the moderating effects
of high and low levels of environmental uncertainty. To accomplish this goal, we follow
prior literature to separate OI strategies into inbound and outbound strategies (Cassiman
and Valentini, 2016; Cheng et al., 2016), in which inbound strategies refer to a firm’s
strategies involving the exploration of knowledge from external parties, while outbound
strategies refer to a firm’s strategies involving the exploitation and commercialization of its Leveraging
own internal knowledge (Chesbrough, 2017; Cheng et al., 2016). open
In addition, because OI depends on a firm’s external connections and its ability to
manage innovation processes (Bogers et al., 2018), we propose that two specific types of
innovation
organizational capabilities, alliance management capability and absorptive capacity[1], strategies
substantially increase the effect of OI on eco-innovation performance. Specifically, alliance
management capability enables the firm to pursue more extensive eco-innovation by
making the firm more skilled at finding suitable partners (Huang and Li, 2017; Kauppila, 1247
2015; Leischnig et al., 2014). Besides, absorptive capacity enables the firm to identify,
assimilate, transform and commercially apply the eco-related knowledge acquired from
outside and successfully transform stocks of internal and external resources obtained from
OI strategies into new eco-products (Chen et al., 2015; Delmas et al., 2011; Zahra and George,
2002).
Overall, we rely on capabilities theory to examine how alliance management capability
and absorptive capacity individually complement inbound and outbound strategies to
increase eco-innovation performance under high and low levels of environmental
uncertainty. We test these relationships (the definition of each key research variable is
summarized in the Appendix) using hierarchical moderated regression analysis with a
primary survey and secondary proxy data collected from 232 Taiwan-based manufacturing
firms. We find that in a high level of environmental uncertainty, alliance management
capability complements inbound and outbound strategies to increase eco-innovation
performance. However, absorptive capacity complements only inbound strategies, not
outbound strategies. Accordingly, this study makes a theoretical contribution to the eco-
innovation literature by offering a view on the relationship between OI and eco-innovation
performance, while considering the joint effects of specific types of organizational
capabilities and levels of environmental uncertainty. In doing so, we provide additional
insights into how to increase eco-innovation performance by aligning OI and organizational
capabilities in dynamic environments.

2. Background and theory

Eco-innovation performance refers to an innovation that reduces a firm’s impact on the
environment and allows the firm to achieve environmental benefits (Yayavaram and Chen,
2015). Despite growing interest in managing eco-innovation performance, a review of the
extant literature reveals that most previous studies tend to focus on how internal and
external factors separately influence eco-innovation performance (Salim et al., 2019; García-
Granero et al., 2018; He et al., 2018). Scant research attention has been devoted to how joint
effects of internal and external factors influence eco-innovation performance. More
specifically, an increased understanding on how joint effects of OI and organizational
capabilities enhance eco-innovation performance is still missing. For example, Salim et al.
(2019) present a systematic review of internal capabilities for enhancing eco-innovation
performance of manufacturing firms. García-Granero et al. (2018) find 30 indicators for eco-
innovation performance based on a literature review. He et al. (2018) provide an overview of
eco-innovation performance in a corporate environment.
OI refers to “a distributed innovation process based on purposively managed knowledge
flows across organizational boundaries, using pecuniary and non-pecuniary mechanisms in
line with the organization’s business model” (West et al., 2014, p. 806). Drawing on the view
of Chesbrough (2017), OI comprises two strategies, namely, inbound and outbound. Inbound
strategies involve identifying and acquiring knowledge from external sources, while
outbound strategies involve exploiting a firm’s internal knowledge through
SAMPJ commercialization in the external market (Cassiman and Valentini, 2016; Cheng et al., 2016).
11,7 In relation to eco-innovation, referring to the improvement of products or processes that
achieve ecological-specified sustainability targets (Adams et al., 2016; Díaz-García et al.,
2015; Chen, 2008), OI is in line with knowledge management, which involves the use of a
strategic and continuous process of research, development and eco-innovation of the
business in firms that reaches beyond the firms’ boundaries to external parties (Lopes et al.,
1248 2017). The establishment of this new model encourages researchers to consider the
contributions of OI to eco-innovation development (Behnam et al., 2018). The literature also
clearly indicates that OI increases the options for eco-innovation inputs and provides
additional opportunities to eco-innovation development (Arfi et al., 2018; Lopes et al., 2017;
Ghisetti et al., 2015).
However, despite this progress, researchers still do not know whether there are joint
impacts of both external environments and internal organizational capabilities on eco-
innovation performance and, if so, how big these impacts are. In terms of external
environments, as prior knowledge rapidly becomes obsolete in highly dynamic
environments, firms implementing OI need to deal with environmental uncertainty to
configure their knowledge resources quickly (Cheng et al., 2016). Similarly, in the context of
eco-innovation, to remain competitive in dynamic environments, firms need to handle
environmental uncertainty so they can improve their eco-innovation development (Lo and
Shiah, 2016; Wu, 2013). As indicated by Lo and Shiah (2016) and Wu (2013), eco-innovation
can yield competitive advantage, but this effect is contingent on the level of uncertainty of
the firm’s external environment.
In terms of internal organizational capabilities, following previous studies (Behnam et al.,
2018; Rubera et al., 2016; Sisodiya et al., 2013), we view OI as management interventions
complemented by organizational capabilities to influence the amount of firm eco-innovation.
This argument is consistent with those in capabilities theory, which suggest that
organizations’ innovation strategies (e.g. OI) should be complemented by organizational
capabilities in sustainable innovation development (Behnam et al., 2018). For example,
regarding eco-innovation, Behnam et al. (2018) suggest that to effectively leverage OI for
sustainable innovation, firms need to build/develop OI capability to derive insights from
complex knowledge obtained from external/internal parties. Likewise, to effectively
leverage OI inbound strategies, firms must use relational capability to assess external
resources (Sisodiya et al., 2013). Rubera et al. (2016) also indicate that a specific type of
organizational capability (new product development capability) is especially needed to
leverage the effect of OI on firm innovation. In short, without the use of appropriate
organizational capabilities, a firm’s OI may lose their value over time. As capabilities theory
suggests, a firm’s innovation strategies cannot be fully and effectively implemented without
the support of proper organizational capabilities (Slater et al., 2014). Similarly, the efficacy of
OI to enhance eco-innovation performance depends on the presence of organizational
capabilities.
Building on the above discussions, we focus particularly on two specific organizational
capabilities, alliance management capability and absorptive capacity. This is mainly
because both alliance management capability and absorptive capacity are essential
organizational capabilities for configuring organizations’ internal and external resources
and are among the most frequently studied capabilities in the extant innovation literature
(Kauppila, 2015; Eggers et al., 2014; Slater et al., 2014; Delmas et al., 2011).
Finally, according to contingency theory (Donaldson, 2001), the effectiveness of OI is
contingent not only on the appropriate fit between OI and external environments but also on
the alignment of OI with internal organizational capabilities (Bogers et al., 2017;
Huizingh, 2011). As such, the matching of environmental uncertainty with organizational Leveraging
capabilities is essential to the way OI and eco-innovation study. Nevertheless, the joint open
effects of environmental uncertainty and organizational capabilities also make the
relationships between OI and eco-innovation performance more complex, as we discuss
innovation
next. strategies

3. Hypotheses development
1249
3.1 Open innovation strategies and environmental uncertainty
How does environmental uncertainty influence the effects of OI strategies on eco-innovation
performance? The contingent view posits that the benefits of innovation strategies depend
on the context in which these strategies are implemented (Donaldson, 2001). As firms that
use OI operate mostly within external environments, which often influence their
opportunities for innovation development (Bogers et al., 2018), environmental uncertainty
should moderate the effects of OI on eco-innovation performance.
Specifically, the extant empirical literature finds that OI strategies tend to be positively
related to innovation performance (Cassiman and Valentini, 2016; Cheng et al., 2016;
Sisodiya et al., 2013), mainly because OI strategies enable a firm to look beyond its
boundaries and enrich its own knowledge base. One contextual factor that significantly
affects the effectiveness of OI strategies is environmental uncertainty (Hung and Chou,
2013). For example, a rapid pace of change in product technologies, unpredictable customer
demand and intensified competition would force firms that implement OI strategies to
search for new external knowledge and expand the scope of their knowledge base to stay
competitive (Cheng et al., 2016). Analyzing the use of OI strategies by 43 cross-sector firms,
Mortara and Minshall (2011) find that firms with more turbulent environments focus
primarily on OI strategies. Similarly, Kim et al. (2015) report that firms facing a high level of
environmental uncertainty will tend to rely more on OI strategies. Following this line of
thought, firms that engage in OI strategies in a high level of environmental uncertainty have
a relatively strong need to make sufficient use of external eco-related resources (Behnam
et al., 2018) and expansion of their scope of eco-related knowledge (Lopes et al., 2017). As a
result of meeting the need, firms can more effectively facilitate their eco-innovation
development.
In addition, firms pursuing OI strategies also tend to exploit internal ideas or
technological knowledge that flow out of firms through licensing, patenting or contractual
agreements, to gain monetary or non-monetary benefits (Hu et al., 2015). Similarly, firms
that pursue OI strategies are more likely to obtain greater value from their internal
knowledge and technologies (Cassiman and Valentini, 2016). Further, firms that adopt OI
strategies are more likely to identify new innovation opportunities, reinforcing their ability
to effectively generate eco-innovations (Cheng et al., 2016).
As such, we posit that a high level of environmental uncertainty should increase the
effect of OI strategies on eco-innovation performance. This is because when environmental
uncertainty is high, eco-product lifecycles tend to be comparatively short and eco-related
technological paradigm shifts relatively frequent (Zhao et al., 2018; Wu, 2013; Schiederig
et al., 2012). Although the implementation of OI strategies provides ample eco-innovation
opportunities, the need for upgrading current internal eco-knowledge becomes crucial (Van
Kleef and Roome, 2007), to more effectively respond to a rapid pace of eco-related
technological change, unpredictable customer demand and intensified competition (Lin and
Ho, 2011). To continuously enhance their competitiveness in dynamic environments, firms
that implement OI strategies are required to focus more on exploring novel eco-knowledge
than on exploiting existing internal eco-knowledge (Lopes et al., 2017). As reported by Hung
SAMPJ and Chou (2013), in high environmental uncertainty, firms pursuing OI strategies tend to
11,7 collaborate with external partners to use their own technological resources for
disseminating their ideas and then explore new technical competence via commercialization.
In contrast, firms have less desire to perform OI strategies to search for new eco-
knowledge in a stable environment because firms with a low level of environmental
uncertainty have relatively little need to make use of external knowledge (Schilke, 2014; Lin
1250 and Ho, 2011). Thus, the cost of searching for external knowledge would exceed the benefit
(Hu et al., 2015). As a result, internal research and development (R&D) strategies become
more effective than external R&D collaboration to developing eco-innovations. While firms
may still be able to develop eco-innovations through internal R&D (Van Kleef and Roome,
2007), it will be more time-consuming and less cost-effective than for other firms with
enough diversified eco-knowledge to facilitate eco-innovation development (Zhang et al.,
2018).
In addition, at a low level of environmental uncertainty, customers are more concerned
about eco-product affordability and availability, care less about eco-product variety and
competitors’ actions seem to pose no immediate threat (Zhao et al., 2018; Wu, 2013). While OI
strategies are critical to firms’ eco-innovation development when environmental uncertainty
is high, stable environments often allow firms to sell existing innovations profitably,
without much alteration (Lichtenthaler, 2009), making OI strategies relatively less central to
eco-innovation. Further, when implementing OI strategies in relatively stable environments,
firms tend to follow established partner selection protocols and engage in social bonding
with their partners (Manotungvorapun and Gerdsri, 2016). Therefore, firms that implement
OI strategies are more likely to exploit internal eco-knowledge (the improvement and
refinement of existing knowledge) than to explore internal eco-knowledge (the development
of novel knowledge) to fulfill customer needs. The exploitation of current eco-knowledge
would, thus, produce inferior eco-innovation performance (Arfi et al., 2018).
Based on the above discussions, we posit that firms that pursue OI strategies are better
able to facilitate eco-innovation development in a high level of environmental uncertainty.
Therefore,

H1. The effect of open innovation strategies on eco-innovation performance is stronger

when environmental uncertainty is high than when it is low.

3.2 Alliance management capability and environmental uncertainty

OI demands a connection to external sources of innovation inputs, and such a connection
requires boundary-spanning mechanisms by the firm (Bogers et al., 2018). In practice,
boundary-spanning mechanisms involve a firm’s interactions with other firms that operate
in similar or complementary industries and technologies (Lopez-Vega et al., 2016). They also
involve research collaborations with universities or research centers (West et al., 2014).
Whatever their form, boundary-spanning mechanisms normally entail the development of
an alliance management capability (Kauppila, 2015; Leischnig et al., 2014). Alliance
management capability refers to a firm’s capacity “to purposefully create, extend or modify
the firm’s resource base, augmented to include the resources of its alliance partners” (Helfat
et al., 2009, p. 66).
The enhanced inter-alliance engagement will subsequently improve eco-related resource
access and transfer (Huang and Li, 2017), support OI and, ultimately, increase eco-
innovation performance (Lopes et al., 2017; Adams et al., 2016). Leischnig et al. (2014)
suggest that firms with strong alliance management capability increase their ability to
engage in effective OI and connect with external sources of new product development
inputs. In addition, the strategy literature has suggested that the concept of alliance Leveraging
management capability, also known as relational capability (Capaldo, 2007; Lorenzoni and open
Lipparini, 1999), reflects the joint capability of a dyad and captures the internal attributes of
a firm that enable a partnership to achieve particular advantages (Dyer and Singh, 1998),
innovation
such as superior innovation performance (Sisodiya et al., 2013). Specifically, relational strategies
capability is an important ability a firm can use to establish and maintain relationships with
external partners (Capaldo, 2007). Firms equipped with this capability will be well-
positioned to materialize the potential benefits of OI because they can manage different 1251
relationships with different OI partners more effectively (Sisodiya et al., 2013). In addition, as
relational capability is related to capturing, sharing and disseminating alliance management
know how gained from previous alliance experiences (Kale and Singh, 2007), firms can make
use of this specific kind of capacity for obtaining additional knowledge from alliances
(Lorenzoni and Lipparini, 1999), thus, leading to superior innovation performance (Sisodiya
et al., 2013). As such, effective alliance management capability enables firms to evaluate the
value of OI, increase opportunities for creating successful new eco-products or designing
new eco-processes and, ultimately, increase eco-innovation performance.
Nevertheless, the impact of alliance management capability on eco-innovation
performance should depend on the level of environmental uncertainty (Zhao et al., 2018)
because the eco-related business environment in which a firm operates is important in
determining the firm’s organizational capabilities (Huang et al., 2016). For instance, at a low
level of environmental uncertainty, the knowledge exchange process is slow and firms have
little need or incentive to engage in heavy external alliance management-related practices
(Schilke, 2014). As a firm’s alliance management capability reflects its ability to leverage
external resources in complex alliance management (Leischnig et al., 2014), alliance
management capability will rest on routinized practices that leverage resources obtained
from existing alliance partners (Eggers et al., 2014). Under this circumstance, managers are
encouraged to stick to current eco-related resources and, thus, fail to develop new eco-
products (Zhao et al., 2018; Roper and Tapinos, 2016). Therefore, the positive effect of
alliance management capability on a firm’s eco-innovation performance will be
comparatively weak when the level of environmental uncertainty is low.
In contrast, when an environment is unstable, firms must carry out complex changes,
such as reconfiguring existing eco-resources or devising new ones, to maintain
competitiveness (Schiederig et al., 2012). Thus, firms that possess alliance management
capability are better able to efficiently build alliance networks and access to new eco-related
resources (Huang and Li, 2017), leading to greater eco-innovation performance. Additionally,
the nature of alliance networks (e.g. breadth, composition or depth) becomes unstable and
unpredictable when the level of environmental uncertainty is high (Kauppila, 2015; Eggers
et al., 2014). As such, possessing alliance management capability by working closely with
alliance partners to facilitate effective communication with each other, would accelerate the
overall eco-innovation development process and eventually increase the success of eco-
innovation. Therefore,

H2. The effect of alliance management capability on eco-innovation performance is

stronger when environmental uncertainty is high than when it is low.

3.3 Absorptive capacity and environmental uncertainty

We posit absorptive capacity as the other crucial organizational capability to increase the
value of OI. Based on studies of Delmas et al. (2011), Zahra and George (2002), Cohen and
Levinthal (1990), we define absorptive capacity as a firm’s ability to recognize and
SAMPJ understand new external knowledge, assimilate valuable external knowledge and apply
11,7 assimilated external knowledge. This suggests that absorptive capacity consists of
processes to recognize the value of new external eco-related knowledge, to absorb this eco-
related knowledge and to convert it into productive, valuable and firm-specific learning
outcomes directly relevant to its activities (Albort-Morant et al., 2018). This is consistent
with capabilities theory (Helfat and Peteraf, 2015), in that absorptive capacity is recognized
1252 as a capability pertaining to knowledge creation and utilization that affects functional
competencies in new product development teams (Delmas et al., 2011; Zahra and George,
2002). In other words, without absorptive capacity, a firm’s eco-related knowledge
acquisition through OI has little value, particularly in terms of eco-innovation success
because it is unable to efficiently leverage these knowledge resources.
From this perspective, firms with strong absorptive capacity are likely to be engaged in
fundamental changes in eco-related knowledge required to facilitate eco-innovation (Albort-
Morant et al., 2018). Therefore, possession of absorptive capacity should leverage novel eco-
knowledge obtained from their OI to develop new eco-products, which, in turn, would
contribute to superior eco-innovation performance. Similarly, the impact of absorptive
capacity on eco-innovation performance should depend on the level of environmental
uncertainty (Wu, 2013).
In a high level of environmental uncertainty, eco-product lifecycles are comparatively
short and eco-related technological paradigm shifts are relatively frequent (Lin and Ho,
2011; Wu, 2013; Schiederig et al., 2012). As firms with strong absorptive capacity are able to
deal with rapid change in eco-product features and use novel eco-related knowledge to
respond to uncertain and changing market needs (Albort-Morant et al., 2018), highly
dynamic environments allow firms to embrace eco-innovations profitably, making
absorptive capacity critical to eco-innovation development. In addition, as in a high level of
environmental uncertainty, external eco-related technological knowledge is increasingly
diversified, combining and transforming diversified knowledge into new knowledge has
been shown to be a central factor in firms’ innovation performance (Cheng et al., 2016). Thus,
firms with strong absorptive capacity are able to rapidly transform diversified eco-
knowledge to develop new eco-products, enhancing their chance to succeed in eco-
innovation performance.
On the other hand, when the level of environmental uncertainty is low, firms can stay
competitive without re-inventing current eco-knowledge (Lin and Ho, 2011). As such, they
are likely to introduce new eco-products using existing routines and knowledge (Helfat and
Winter, 2011), leading firms to pursue existing eco-products rather than seek to create new
ones (Ketata et al., 2015). Put another way, a low level of environmental uncertainty prevents
firms from using absorptive capacity to explore new competencies from external parties,
making absorptive capacity relatively less effective on eco-innovation development.
Therefore,

H3. The effect of absorptive capacity on eco-innovation performance is stronger when

environmental uncertainty is high than when it is low.

3.4 Open innovation strategies, alliance management capability and environmental

uncertainty
According to Schilke (2014), when facing dynamic environments, firms need to adjust their
innovation strategies, review organizational capabilities and scan external environments.
This suggests that when firms that use OI face different levels of environmental uncertainty,
they need to adjust their OI and organizational capabilities, to create superior eco-innovation Leveraging
performance. open
In a high level of environmental uncertainty, customer preferences change rapidly,
competitors constantly threaten profitability and the rate of change in the underlying eco-
innovation
related technologies for new eco-products is fast (Zhao et al., 2018; Roper and Tapinos, 2016; strategies
Wu, 2013). In turbulent environments, firms that possess alliance management capability are
more likely to realize the maximum value of their OI strategies because alliance management
capability functions as a knowledge generator of developing innovation (Leischnig et al., 2014). 1253
The extant empirical eco-related literature supports such a notion (Huang and Li, 2017).
Similarly, in a high level of environmental uncertainty, firms that implement OI
strategies and alliance management capability are also more likely to strengthen the effect
of their OI on eco-innovation. This is because firms can better capitalize on alliance
management capability by opening up their internal eco-innovations to gain access to
external advanced eco-related resource exploitation (Huang and Li, 2017), which increases
the breadth and depth of their internal eco-related resources and, thus, is likely to strengthen
their eco-innovation development. For example, analyzing the effect of OI on innovation
performance, Cheng et al. (2016) find that OI strategies that focus particularly on exploiting
internal knowledge are also able to create superior innovation performance. This is because
firms that implement OI strategies typically do not sell patents or agreements or license out
knowledge to external parties unless their offers are considered market novelties. Then,
when the firms license out and reveal internal knowledge to markets, they collaborate with
external parties, through alliance management, to enhance knowledge width and depth
(Cassiman and Valentini, 2016) and, thus, increase the possibility of eco-innovation
performance (Lopes et al., 2017).
On the other hand, in a low level of environmental uncertainty, firms that implement OI
strategies have relatively little need to make use of alliance management capability. This is
because building and maintaining alliance management capability usually requires
substantial investment in an alliance management function that supports alliance
management operations (Schilke and Goerzen, 2010). This leads firms to focus on current
organizational routines (Helfat and Winter, 2011), which could lead firms to pursue existing
eco-products rather than seek to create new ones (Ketata et al., 2015).
In addition, in a low level of environmental uncertainty, firms that implement OI
strategies also have relatively little need to use their external alliance networks to
strengthen the exploitation of their external/internal knowledge. This is mainly because, in
relatively stable environments, firms have little need for investing in alliance management
capability (Leischnig et al., 2014). Most importantly, firms face less pressure to find alliance
partners to transform their internal resources into marketable products (Leischnig et al.,
2014). Following this line of thought, in a low level of environmental uncertainty, firms that
implement OI strategies are unlikely to engage in developing new eco-products through
alliance management capability, thus, leading to inferior eco-innovation performance.
Therefore,

H4. The joint effect of alliance management capability and open innovation strategies
on eco-innovation performance is stronger when environmental uncertainty is high
than when it is low.

3.5 Open innovation strategies, absorptive capacity and environmental uncertainty

When the level of environmental uncertainty is high, the increased uncertainty creates more
opportunities for firms to consider their options and choose appropriate responses to
SAMPJ develop eco-innovation (Lin and Ho, 2011). With absorptive capacity in these environments,
11,7 where eco-innovation opportunities occur relatively frequently, firms that implement OI
strategies are more likely to develop eco-innovation. This is because, with absorptive
capacity, firms can enhance predictability and effectiveness of developing eco-innovation by
reducing uncertainty and increasing the possibility of identifying the most appropriate eco-
innovation opportunities from alliance partners (Wu, 2013), which ultimately results in the
1254 firms’ superior eco-innovation performance. In addition, if firms that implement OI
strategies possess absorptive capacity, they can facilitate greater exploration of new eco-
knowledge (Albort-Morant et al., 2018), which, in turn, produces superior eco-innovation.
Further, in a high level of environmental uncertainty, firms that implement OI strategies
may also benefit from eco-innovation (Cassiman and Valentini, 2016). Absorptive capacity
provides firms with the ability to engage in experimentation of eco-innovation in open
exploration processes (Ghisetti et al., 2015). Thus, with strong absorptive capacity in a high
level of environmental uncertainty, firms that perform OI strategies are able to increase the
opportunities for new eco-product generation, thereby further enhancing eco-innovation
performance.
On the other hand, when environmental uncertainty is low, eco-innovation requirements
are significantly decreased because a low level of environmental uncertainty allows firms to
obtain benefits from selling existing eco-products (Ketata et al., 2015). In this situation, firms
that implement OI strategies find that the costs to invest in developing absorptive capacity
outweigh their gains (Hu et al., 2015). In addition, a low level of environmental uncertainty
decreases the likelihood of firms’ intention to develop new eco-products in reaction to
perceived eco-innovation opportunity (Zhang et al., 2018). In addition, given the costs of such
investments in developing absorptive capacity (Hu et al., 2015), firms that implement OI
strategies may not need to deploy absorptive capacity to generate benefits from their
existing eco-products for these expenses to pay off. While absorptive capacity enables firms
to identify, assimilate, transform and commercially apply the knowledge acquired from the
outside (Delmas et al., 2011; Zahra and George, 2002), the cost of absorptive capacity-
building may prevent firms from focusing on the development of new eco-products and
enhance exploration of existing eco-products (Rosenkopf and Nerkar, 2001).
Overall, while possessing absorptive capacity is critical to firms’ eco-innovation
development (Albort-Morant et al., 2018), firms that implement OI strategies under a low
level of environmental uncertainty are less likely to explore internally/externally new eco-
knowledge, which leads these firms to explore/exploit the possibility of developing eco-
innovation and, in turn, decreases eco-innovation performance. Therefore,

H5. The joint effect of absorptive capacity and open innovation strategies on eco-
innovation performance is stronger when environmental uncertainty is high than
when it is low.

4. Methodology
4.1 Research design and data collection
To test the hypotheses, we used primary survey and archival data sources in Taiwan.
Taiwan is facing the serious threat of environmental pollution, making eco-innovation a
prominent concern for firms attempting to gain legitimacy from society (Cheng et al., 2014).
In addition, to maintain their competitive advantage in China, manufacturers in Taiwan
must continuously collaborate with external parties to develop new eco-products specific to
the Chinese market, which has experienced rapid economic growth over the past decade.
Thus, Taiwan offers a suitable setting in which to examine the interplay among OI, alliance
management capability, absorptive capacity, environmental uncertainty and eco-innovation Leveraging
performance. open
For the sampled firms, we focused on industries with heavy influence on the
environment, such as manufacturing (Sharma and Henriques, 2005). We obtained the
innovation
sampling frame from the Taiwan Environmental Management Association (www.ema.org. strategies
tw), a renowned trade association with more than 20,000 members. From their database, we
obtained the firms’ basic demographic information, including names, addresses, industries
and senior managers’ names. 1255
We chose sample firms that met the following criteria: first, following prior eco-
innovation studies targeting senior managers (Cheng et al., 2014), we identified a senior
manager (e.g. senior new product development manager, vice president and CEO) as the key
informant, as our in-depth interviews revealed that managers in these positions were
knowledgeable about their firms’ OI strategies. We then contacted each firm’s senior
manager by telephone to determine whether the firm had used OI in its eco-innovation
development process. We identified 643 firms as possible candidates for this study. Second,
as the unit of analysis refers to the project level, we asked each firm to identify a completed
eco-innovation project (in which OI was used), launched within the prior three years. As a
result of this process, 317 firms remained.
As with previous studies of developing economies (De Luca and Atuahene-Gima, 2007),
we collected the primary survey data on-site, so we could clarify respondents’ questions and
ensure that the questionnaires collected were complete and usable. Specifically, in early 2014
we recruited trained interviewers, who then presented the questionnaires regarding OI
strategies (Table I presents the measurement items) to the respondents, on-site, with each
interview lasting about one hour. To validate this fieldwork, we randomly called 75
respondents after the interviews to confirm that the interviews were conducted. We found

Open innovation strategies (model fit: x 2/ df = 1.92, RMSEA = 0.04, CFI = 0.95, IFI =
0.93, NNFI = 0.94)
Inbound strategies (a = 0.89; CR = 0.90; AVE = 0.65) (Cheng and Huizingh, 2014) Factor loading

Alliance partners are directly involved in our eco-innovation project 0.81

Our eco-innovation project is highly dependent upon the contribution of alliance
partners, such as customers, clients, research institutes, consultants, suppliers or
universities 0.85
Our firm often buys eco-related R&D from alliance partners for the eco-innovation
project 0.77
Our firm often buys intellectual property, such as patents, copyrights or trademarks,
from alliance partners to be used in the eco-innovation project 0.79
Our firm invests in alliance partners because we would like to get access to their new
eco-knowledge or to obtain other synergies that are beneficial to the eco-innovation
project 0.82
Outbound strategies (a = 0.85; CR = 0.87; AVE = 0.63) (Cheng and Huizingh, 2014)
Our firm often sells licenses, such as patents, copyrights or trade-marks, to alliance
partners so as to better benefit from our eco-innovation project efforts 0.81
Our firm often offers royalty agreements to alliance partners to better benefit from our
eco-innovation project efforts 0.75
Our firm strengthens every possible use of our own intellectual properties regarding the
eco-innovation project so as to better benefit our firm 0.83
Our firm finds spin-offs to better benefit from our eco-innovation project efforts 0.78
Table I.
Notes: a: Cronbach’s alpha; CR: composite reliability; AVE: average variance extracted Measurement items
SAMPJ no evidence of cheating. In line with Zhou et al. (2014), we examined the quality of
11,7 informants’ responses by assessing their knowledge of the questions in the survey (1 =
“little knowledge,” 7 = “a great deal of knowledge”). The mean was 6.18, indicating the
respondents were well-qualified. Among the 317 firms, 281 respondents were successfully
interviewed on-site.
We then collected the secondary proxy data for measuring alliance management
1256 capability, absorptive capacity, environmental uncertainty and eco-innovation performance.
As these secondary proxy data were not available in 49 of the 281 firms in our sample, the
data for these four variables were based on the remaining 232 firms over the period from
2015 to 2018.
The firms in the sample were distributed by sector, as follows: 57 firms were
semiconductor (24.6 per cent), 50 firms came from metal (21.6 per cent), 46 firms represented
machinery (19.8 per cent), 39 firms were petrochemical (16.8 per cent), 29 firms were
pharmaceutical (12.5 per cent) and 11 firms were in other sectors (4.7 per cent). Among the
232 firms, the average total assets were US$720m and the average number of employees
was 1,036.
We tested non-response bias by comparing the first third of respondents with the last
third, in terms of firm characteristics (e.g. firm size and firm age) and focal constructs. The
comparison results revealed no significant differences. Furthermore, we compared the
responding and non-responding firms with regard to their return on assets. The results did
not reveal significant differences in return on assets (t = 0.731, p > 0.10). Thus, non-response
bias is not a major concern for this study.

4.2 Measures
To effectively reduce common method bias, we used separate information sources for
different variables (Podsakoff et al., 2003, p. 898). Specifically, for OI we relied on a survey of
senior managers to obtain information. For alliance management capability, absorptive
capacity, environmental uncertainty and eco-innovation performance, we collected
secondary proxy data provided by China Credit Information Service, the oldest credit-
checking agency in Taiwan and an affiliate of Standard and Poor’s. The details are
described as follows.
The scale for OI is developed and discussed extensively in Cheng and Huizingh (2014)
and consists of nine items, including five items for inbound strategies and four items for
outbound strategies (Table I). Following the methods suggested by Aiken and West (1991),
we mean-centered the variables of inbound strategies and outbound strategies, as well as OI
strategies when it is regarded as a joint construct. The measure used a seven-point Likert
scale (1 = strongly disagree to 7 = strongly agree). We used the double-translation method to
translate the questionnaire from English into Chinese (English-Chinese-English). This
process included:
 the authors initially translating the items into Chinese;
 another two academics translating the Chinese version back into English; and
 a third academic checking the translations to ensure conceptual equivalence
(Douglas and Craig, 2007).

Previous studies have provided many approaches to measure alliance management

capability, such as that of Kale and Singh (1999), who measured it as the coordinative
capacity and processes for articulation, codification, sharing and internalization of alliance-
related knowledge, as well as that of Heimeriks and Duysters (2007), who examined the
extent to which a firm internally applies learning mechanisms that facilitate the transfer and Leveraging
adaptation of the knowledge attained through participation in alliances. We followed the open
study of Lin (2012) to measure alliance management capability by counting a firm’s years of
alliance management experience prior to its current alliance management participation.
innovation
There are three advantages to this approach. First, prior alliance management experience is strategies
often used as a proxy for a firm’s alliance management capability (Schilke and Goerzen,
2010; Kale and Singh, 2007). Second, compared with measuring the external dimensions of
alliance management capability, this approach results in a proxy, that is, close to actual
1257
managerial practice. Examples of these practices are acquisition of knowledge and technical
expertize from alliance partners, as well as attainment of access to network resources of
alliance partners (Geigenmüller and Leischnig, 2017), all of which relate to the development
of firms’ alliance management capability. Third, with this approach, we are able to identify
alliance management capability needed to complement OI in an experienced manner
because OI demands alliance partners’ experience and connections to external sources of
NPD inputs (Kauppila, 2015; Leischnig et al., 2014).
The majority of empirical studies have used overall proxies (e.g. R&D expenditures,
R&D intensity or the number of scientists working in R&D departments) to measure
absorptive capacity (Ebers and Maurer, 2014; Cassiman and Veugelers, 2016; Cohen and
Levinthal, 1990). We reviewed these studies and found that among all these overall proxies,
R&D intensity sounds like the most prominent one. We used it and it is measured as the
share of R&D expenditures in total annual sales revenues, to measure absorptive capacity in
this study.
As for environmental uncertainty, we used an archival index to measure instability in
market sales (Sutcliffe, 1994). We regressed market sales for a period of three years and
divided the standard errors of the regression coefficients by the mean level of the dependent
variable (Davis et al., 2009).
Following Yayavaram and Chen (2015), we used the number of registered patents in the
past three years (2015, 2016 and 2017) to measure eco-innovation performance, as patent
research usually uses a lag of three years to assess innovation outcomes (Ahuja and Katila,
2001) and previous studies have used the number of registered patients to measure eco-
innovation performance (Li et al., 2017; Shapira et al., 2014).
Finally, we considered several control variables. At the firm level, firm size was used as a
control because of its potential impact on eco-innovation activity and was measured on a
logarithmic scale using the number of employees. We also controlled for firm age as the
natural logarithm of a firm’s operating age, to control for the impact of a firm’s age and
experience on eco-innovation. At the industry level, we controlled for industry concentration
as:
 low;
 medium or
 high

On the basis of evaluations by senior managers, as industry concentration could particularly

affect the monitoring of environmental uncertainty in eco-related studies (Dupire and M’Zali,
2018).

4.3 Construct validity

We used confirmatory factor analysis to test the validity of OI. The model fit the data
satisfactorily ( x 2/df = 1.92, RMSEA = 0.04, CFI = 0.95, IFI = 0.93, NNFI = 0.94) and the
SAMPJ factor loadings were highly significant (p < 0.001). The value for composite reliability was
11,7 above 0.70 and the value for average variance extracted was greater than 0.5. Thus, the
construct of OI possessed adequate convergent validity (Fornell and Larcker, 1981).
We tested discriminant validity by examining whether the AVEs of the latent variables
were greater than the squared correlations between the latent variables. Table II shows the
correlations between the latent constructs. All of the AVEs were larger than the squared
1258 correlations between the latent variables. Thus, our latent constructs displayed acceptable
discriminant validity (Fornell and Larcker, 1981). Table II reports the summary of scale
statistics.

5. Analyzes and results

5.1 Testing of the hypotheses
We tested the hypotheses by using hierarchical moderated regression analysis (Aiken and
West, 1991). To mitigate potential multi-collinearity, we mean-centered the variable of OI
before creating the interaction terms (Aiken and West, 1991).
Table III summarizes the results of regression analysis. Model 1 includes control
variables only, Model 2 adds industry sector controls, Model 3 adds the main effects of
inbound and outbound strategies, alliance management capability, absorptive capacity and
environmental uncertainty and Model 4 adds the interaction effects. The results in Table III
reveal that Model 4 performs the best and explains 49 per cent of the total variance in eco-
innovation performance. Thus, Model 4 is used to test the research hypotheses
H1 posits that environmental uncertainty moderates the effect of OI strategies on eco-
innovation performance. The results show that the interaction between inbound strategies

Variables Mean SD 1 2 3 4 5 6 7 8 9 10 11 12 13

1. Inbound
strategies 4.96 0.74 0.81
2. Outbound
strategies 4.88 0.68 0.08 0.79
3. Alliance
management
capability 12.18 7.68 0.19a 0.16a 2
4. Absorptive
capacity 0.25 0.27 0.30 b 0.12 0.08 2
5. Environmental
uncertainty 8.18 3.41 0.28b 0.20 a
0.19 a
0.17a 2
6. Eco-innovation
performance 6.3614.76 0.16a 0.19a 0.27 b 0.18a 0.16a 2
7. Firm size (log) 4.69 1.35 0.12 0.10 0.18a 0.01 0.04 0.15a2
8. Firm age (log) 4.32 1.23 0.10 0.09 0.04 0.03 0.10 0.16a 0.022
9. Industry
concentration 2.35 0.73 0.02 0.07 0.11 0.02 0.06 0.02 0.03 0.012
10. Semiconductor 0.12 0.37 0.02 0.02 0.03 0.09 0.05 0.04 0.03 0.05 0.042
11. Metal 0.23 0.43 0.03 0.05 0.06 0.05 0.03 0.02 0.01 0.04 0.06 0.012
12. Machinery 0.25 0.46 0.02 0.04 0.03 0.07 0.04 0.04 0.02 0.03 0.05 0.03 0.03
Table II. 13. Petrochemical 0.17 0.34 0.04 0.06 0.09 0.04 0.05 0.05 0.04 0.02 0.02 0.05 0.05 0.04
Descriptive statistics, 14 .Pharmaceutical 0.08 0.26 0.09 0.04 0.03 0.02 0.04 0.01 0.02 0.06 0.04 0.02 0.04 0.02 0.01
correlations and Notes: SD.: standard deviation; Italic figures on the diagonal are the square root of the AVE. ap < 0.05;
AVEs b
p < 0.01 (N = 232; two-tailed tests)
 Model 1 Model 2 Model 3 Model 4
Leveraging
open
Control variables innovation
Firm size 0.08 0.11 0.12 0.13 strategies
Firm age 0.10 0.12 0.13 0.14
Industry concentration 0.06 0.04 0.05 0.06
Industry sectors 1259
Semiconductor 0.01 0.03 0.04
Metal 0.03 0.05 0.06
Machinery 0.15 0.12 0.14
Petrochemical 0.06 0.08 0.07
Pharmaceutical 0.12 0.13 0.15
Main effects
Inbound strategies 0.29** 0.35***
Outbound strategies 0.21* 0.23*
Alliance management capability 0.30** 0.34***
Absorptive capacity 0.22* 0.27**
Environmental uncertainty 0.10 0.13
Interaction effects
Inbound strategies  environmental uncertainty 0.29**
Outbound strategies  environmental uncertainty 0.11
Alliance management capability  environmental uncertainty 0.27**
Absorptive capacity  environmental uncertainty 0.21*
Alliance management capability  inbound strategies 
environmental uncertainty 0.30**
Alliance management capability  outbound strategies 
environmental uncertainty 0.22*
Absorptive capacity  inbound strategies  environmental
uncertainty 0.28**
Absorptive capacity  outbound strategies  environmental
uncertainty 0.14
Adjusted R2 0.17 0.25 0.31 0.39
R2 change 0.10** 0.13** 0.17**
Table III.
Notes: * p < 0.05; ** p < 0.01; *** p < 0.001 (N = 232; Two-tailed tests) Regression results

and environmental uncertainty is significant and positive ( b = 0.29; p < 0.01). However, the
interaction term of outbound strategies and environmental uncertainty is not significant
( b = 0.11), partially supporting H1.
H2 suggests that environmental uncertainty moderates the influence of alliance
management capability on eco-innovation performance. The interaction term between
alliance management capability and environmental uncertainty is significant and positive
( b = 0.27; p < 0.01), supporting H2.
H3 posits that environmental uncertainty moderates the effect of absorptive capacity on
eco-innovation performance. The interaction term between absorptive capacity and
environmental uncertainty is significant and positive ( b = 0.21; p < 0.05), supporting H3.
H4 suggests that environmental uncertainty has a moderating effect on the relationship
between the joint effect of “alliance management capability and OI strategies” and eco-
innovation performance. The results support H4, as the three-way interaction effect of
alliance management capability, inbound strategies and eco-innovation performance is
positive and significant ( b = 0.30; p < 0.01). Similarly, the three-way interaction effect of
SAMPJ alliance management capability, outbound strategies and eco-innovation performance is
11,7 positive and significant ( b = 0.22; p < 0.05).
Turning to absorptive capacity, H5 suggests that environmental uncertainty moderates
the relationship between the joint effect of “absorptive capacity and OI strategies” and eco-
innovation performance. The results partially support H5, as the three-way interaction
effect of absorptive capacity, inbound strategies and eco-innovation performance is positive
1260 and significant ( b = 0.28; p < 0.01). However, the three-way interaction of absorptive
capacity, outbound strategies and eco-innovation performance is not significant ( b = 0.14),
suggesting that environmental uncertainty does not influence the relationship between the
joint effect of “absorptive capacity and outbound strategies” on eco-innovation performance.

5.2 Post-hoc analyzes

As recommended by Aiken and West (1991) and Preacher et al. (2006), we conduct both
graphical and simple slope analyzes to further explore the nature of the interaction effects on
eco-innovation performance and to understand interaction patterns. The simple slope
analyzes involve splitting the moderator (environmental uncertainty) into a high level (two
standard deviations more than the mean) and a low level (two standard deviations less than
the mean). The eight graphs in Figure 1 [Figures 1(a)-1(d)] and Figure 2 [Figures 2(a)-2(d)]
depict the interaction effects presented in Model 4 (Table III).[AQ2] The eight graphs are
interpreted as follows.
Both inbound and outbound strategies have significant impacts on eco-innovation
performance (main effects in Table III). Interestingly, inbound strategies are more effective
in an unstable environment (0.29**, p < 0.01, Figure 1(a), b = 0.49**), but the effectiveness
of outbound strategies is not significantly different across different levels of environmental
uncertainty (0.11, Figure 1(b), b = 0.10). Inbound strategies appear to be more effective in
creating eco-innovation performance when the level of environmental uncertainty is high.
Both alliance management capability and absorptive capacity have significant impacts
on eco-innovation performance (Model 4 in Table III). The level of environmental
uncertainty influences the effectiveness of both capabilities. Specifically, alliance
management capability (0.27**, p < 0.01) and absorptive capacity (0.21*, p < 0.05) appear to
be more effective in an unstable environment than in a stable environment, as displayed in
Figure 1(c) ( b = 0.47**) and Figure 1(d) ( b = 0.36*).
The joint effects of alliance management capability/absorptive capacity and inbound/
outbound strategies on eco-innovation performance, across high/low levels of environmental
uncertainty, are supported, as displayed in Figure 2. Figure 2(A) ( b = 0.55**) indicates that
the joint effect of high alliance management capability and high inbound strategies on eco-
innovation performance is more effective in an unstable environment than in a stable
environment. In contrast, other joint effects (high alliance management/low inbound, low
alliance management/high inbound and low alliance management/low inbound) make no
difference across different levels of environmental uncertainty. Likewise, the joint effects of
alliance management capability and outbound strategies (Figure 2(b), b = 0.35*) and the
joint effects of absorptive capacity and inbound strategies (Figure 2(c), b = 0.54**), on eco-
innovation performance, are also more pronounced in an unstable environment. However,
the joint effects of absorptive capacity and outbound strategies are not influenced by
environmental uncertainty (Figure 2(d), b = 0.08).

6. Discussion and conclusion

The purpose of this study is to investigate how two types of organizational capabilities
(alliance management capability as one, absorptive capacity as the other) separately
 High environmental uncertainty
y High environmental uncertainty
y Leveraging
S.D. 1.5
Low environmental uncertainty
S.D. 1.5
Low environmental uncertainty
open
innovation
Eco-innovation performance

Eco-innovation performance
1
0.5 0.5 strategies
0 0
–0.5 –0.5

–1 –1
1261
–1.5 –1.5
–2 –1 0 1 2 S.D. –2 S.D.
–1 0 1 2
Inbound strategies Outbound strategies
(simple slope analysis: b = 0.49; p < 0.01) (simple slope analysis: b = 0.10, n.s.)

(a) (b)
High environmental uncertaintyy
High environmental uncertainty
y
Low environmental uncertainty
S.D. 1.5 Low environmental uncertainty
S.D. 1.5
Eco-innovation performance

Eco-innovation performance

1
1
0.5
0.5
0
0
–0.5
–0.5
–1
–1
–1.5
–2 S.D. –1.5
–1 0 1 2 S.D.
–2 –1 0 1 2

Alliance management capability

Figure 1.
Absorptive capacity
(simple slope analysis: b = 0.47; p < 0.01) (simple slope analysis: b = 0.36; p < 0.05) Interaction of open
(c) (d) innovation strategies/
organizational
Notes: SD: standard deviations; (a) interaction graphs of environmental uncertainty and capabilities and
inbound strategies; (b) interaction graphs of environmental uncertainty and outbound environmental
strategies; (c) interaction graphs of environmental uncertainty and alliance management uncertainty on eco-
capability; (d) interaction graphs of environmental uncertainty and absorptive capacity innovation
performance

complement OI strategies (inbound and outbound) to increase eco-innovation performance

under different environmental uncertainty conditions (either high uncertainty or low
uncertainty condition). Our findings show that, first, in a high level of environmental
uncertainty, alliance management capability complements inbound/outbound strategies to
increase eco-innovation performance, but absorptive capacity complements only inbound
strategy, not outbound strategy. Second, in a low level of environmental uncertainty, the
joint effects of alliance management capability/absorptive capacity and inbound/outbound
strategies on eco-innovation performance appear to make no difference. Having fulfilled the
purpose of this study, what follows is to categorically identify the theoretical contributions
of this study.

6.1 Theoretical implications

First, our study provides new findings as to the question of whether the joint use of internal
and external factors is beneficial for eco-innovation. Our findings indicate that alliance
management capability and absorptive capacity constitute two important enabling factors
to enhance eco-innovation performance. Alliance management capability provides firms
SAMPJ S.D. 1.5 S.D. 1.5

11,7 Eco-innovation performance

Eco-innovation performance
1 HIS, HAC 1
0.5 0.5 HOS, HAC

0 LIS, HAC 0
LOS, HAC
–0.5 HIS, LAC –0.5
LIS, LAC LOS, LAC
–1 –1
1262 –1.5 Low High –1.5 Low High
HOS, LAC

Environmental Environmental Environmental Environmental

uncertainty uncertainty uncertainty uncertainty

HIS: high inbound strategies HOS: high outbound strategies

LIS: low inbound strategies LOS: low outbound strategies
HAC: high alliance management capability HAC: high alliance management capability
LAC: low alliance management capability LAC: low alliance management capability
(simple slope analysis: b = 0.55; p < 0.01) (simple slope analysis: b = 0.35; p < 0.05)

(a) (b)

S.D. 1.5
S.D. 1.5
Eco-innovation performance

Eco-innovation performance
1
0.5 HIS, HAC
0.5
HOS, HAC
0
LIS, HAC 0 LOS, LAC
–0.5 LOS, HAC
HIS, LAC –0.5
HOS, LAC
–1 LIS, LAC –1
–1.5 Low High –1.5 Low High
Environmental Environmental Environmental Environmental
uncertainty uncertainty uncertainty uncertainty
HIS: high inbound strategies HOS: high outbound strategies
LIS: low inbound strategies LOS: low outbound strategies
Figure 2. HAC: high absorptive capacity
LAC: low absorptive capacity
HAC: high absorptive capacity
LAC: low absorptive capacity
Three-way (simple slope analysis: b = 0.54; p < 0.01) (simple slope analysis: b = 0.08; n.s.)
interaction of (c) (d)
environmental
uncertainty, open Notes: SD: standard deviations; (a)three-way interaction graphs of environmental
innovation strategies uncertainty, inbound strategies, and alliance management capability; (b) three-way interaction
and organizational graphs of environmental ncertainty, outbound strategies, and alliance management capability;
capabilities on eco- (c) three-way interaction graphs of environmental uncertainty, inbound strategies, and
innovation absorptive capacity; (d) three-way interaction graphs of environmental uncertainty, outbound
performance
strategies, and absorptive capacity

with access to external eco-related resources from within their alliance partners, while
absorptive capacity assists firms in exploring eco-knowledge from outside and then
developing their own eco-innovations. Our study bridges these three research streams (OI,
organizational capabilities and environmental uncertainty) by revealing that managers’
perceptions of eco-environmental uncertainty set off their focus on organizational
capabilities, which, in turn, fosters the firm’s OI. Thus, this study extends eco-innovation
literature (Adams et al., 2016; Díaz-García et al., 2015; Klewitz and Hansen, 2014) by
developing a perspective to examine how OI inbound/outbound strategies, alliance
management capability and absorptive capacity and high/low levels of environmental
uncertainty jointly affect eco-innovation performance.
Second, our analyzes reveal that firms that are well-equipped to connect through alliance
partners are in a better position to harvest eco-related resources from their alliance
management capability. In addition, when the superior absorptive capacity is activated in a
knowledge-rich environment, eco-innovation performance increases. Overall, these results
suggest that alliance management capability and absorptive capacity facilitate firms’ Leveraging
achievement of superior eco-innovation performance in unstable environments rather than open
in stable environments. Specifically, in a more dynamic environment, firms with strong
alliance management capability are better able to create eco-related resources and
innovation
knowledge flows within and across the firms to produce superior eco-innovation strategies
performance. Similarly, in a more dynamic environment, firms with strong absorptive
capacity are better able to configure new combinations of eco-related resources and
knowledge to create superior eco-innovation performance. As such, this study highlights the 1263
need to carefully consider the roles of alliance management and absorptive capacity that
may be more tacit in facilitating collaborative partnerships with external parties and in
leveraging their insights for OI to gain eco-innovation. These findings are consistent with
the capabilities theory argument that capabilities embedded within an organization build
and integrate competencies across strategies and ultimately lead to superior innovation
performance (Eisenhardt and Martin, 2000). This study also echoes the recent call from eco-
innovation studies for more empirical investigations into the role of organizational
capabilities in eco-innovation (Behnam et al., 2018; Huang and Li, 2017; Adams et al., 2016).
However, our results show there is no support for the joint effects of absorptive capacity
and outbound strategies on eco-innovation performance. Although alliance management
capability and absorptive capacity are important enablers of eco-innovation performance,
we offer the novel insight that compared with absorptive capacity, alliance management
capability is a more valuable organizational capability in OI and eco-innovation. Eco-
innovation studies have investigated the direct and moderating impact of capabilities on
driving innovation strategies (Behnam et al., 2018; Lopes et al., 2017; Ghisetti et al., 2015).
Extending prior research, our findings explicate how organizational capabilities interact
with OI to affect firms’ eco-innovation performance. Our findings also help delineate
boundary conditions for capabilities theory–an important precondition for any theory to
move forward (Helfat and Peteraf, 2015).
Finally, our study enriches the eco-innovation literature in the challenging context of the
Chinese and Taiwanese emerging markets, in which rapidly changing eco-environments
pose severe challenges to survival (Cheng et al., 2014). Extending prior studies based on the
Western context (Adams et al., 2016; Díaz-García et al., 2015; Klewitz and Hansen, 2014), our
findings show the positive role of managerial focus on OI and environmental uncertainty in
Taiwan and further reveal the important role of building organizational capabilities. Adding
to this line of enquiry, our findings suggest that environmental uncertainty plays a
moderating role in the link between OI and eco-innovation performance. This study,
therefore, contributes to answering the question of under what conditions the presence of OI
in organizations generates superior innovation performance (Chesbrough, 2017). In addition,
this study’s overarching framework allows for contrasting the efficacy of eco-innovation in
settings with organizational capabilities and varying environmental uncertainty. Overall,
this study enriches our knowledge of the use of hybrid internal and external factors by
describing the interplay of these factors with environmental uncertainty in a setting of eco-
innovation in emerging markets.

6.2 Managerial implications

Our findings provide some valuable insights to managers who consider the implementation
of eco-innovation with OI. First, although managers often view environmental responsibility
as a financial cost (Adams et al., 2016), our findings reveal a positive impact of OI on eco-
innovation performance. By emphasizing the level of eco-environmental uncertainty and
building/developing organizational capabilities such management helps increase eco-
SAMPJ innovation performance. As such, managers should view pursuing environmental
11,7 responsibility as an opportunity to develop organizational capabilities and create innovation
competitive advantages. Thus, managers should focus more on the benefits of eco-
environmental responsibility in developing organizational capabilities, rather than only on
its costs.
Second, managers should understand the interactive roles of OI inbound/outbound
1264 strategies and high/low levels of environmental uncertainty. While managers often view
eco-environmental responsibility as obligations they have to comply with Klewitz and
Hansen (2014), such pressures actually stimulate managers’ commitments to environmental
responsibility issues, which, in turn, foster innovation development such as OI. Thus, when
facing environmental responsibility pressures from the market, managers should be
proactive in dealing with them and converting them into driving forces by using OI.

6.3 Limitations and future research

As with most studies, the design of this study is subject to limitations, which opens up
opportunities for future research. First, although we collect data from various
manufacturing industries and control for a number of important sources of firm
heterogeneity, further research should extend our model to other specific industries (e.g.
service). Second, future research could consider other types of organizational capabilities
that interact with OI, such as marketing-related capabilities (Bogers et al., 2018) because OI
also need other business practices (e.g. marketing) to facilitate their implementation. Third,
despite the prominent role of organizational capabilities in enhancing eco-innovation
performance, its alternative approaches, exploration and exploitation of organizational
ambidexterity (Hansen et al., 2018), are rarely empirically examined in eco-innovation
studies. While our study distinguishes organizational capabilities into alliance management
capability and absorptive capacity and highlights their value for eco-innovation, the
potential impact of interactions among OI, exploration and exploitation of organizational
ambidexterity on eco-innovation performance is a nascent area of research. We hope future
study extends this inquiry. Fourth, although the scales of inbound and outbound strategies
were adapted from the previous study (Cheng and Huizingh, 2014), the scales may, in part,
be double-loaded, namely, there may be two facets to the items. Future studies might need to
take this potentially problematic issue into account when developing the scales of inbound
and outbound strategies. Finally, OI and eco-innovation are still in developing stages
(Bogers et al., 2018; Chesbrough, 2017; Adams et al., 2016; Díaz-García et al., 2015), so
additional studies to investigate internal and external factors would provide a more
complete understanding of the effects of OI on eco-innovation performance.

Note
1. The authors thank the Associate Editor and anonymous reviewers for providing this
constructive suggestion and helpful guidance.

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Further reading
Enkel, E., Dingler, A. and Mangels, C. (2017), “Open innovation: enhancing theory and practice by
integrating the role of innovation communication”, in Strategy and Communication for
Innovation, Springer International Publishing, pp. 131-145.
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of Product Innovation Management, Vol. 27 No. 6, pp. 785-796.
SAMPJ Appendix
11,7
Research
variables Definitions (references)

1270 Eco-innovation Eco-innovation refers to the improvement of products or processes, which

achieve ecological-specified sustainability targets (Adams et al., 2016; Díaz-
García et al., 2015; Chen, 2008)
Eco-innovation Eco-innovation performance is defined as eco-innovations developed by the
performance firm, as measured by the number of registered patents (Yayavaram and Chen,
2015)
Open innovation Open innovation refers to “a distributed innovation process based on
purposively managed knowledge flows across organizational boundaries, using
pecuniary and non-pecuniary mechanisms in line with the organization’s
business model” (West et al., 2014, p. 806)
Inbound strategy Inbound strategy refers to a firm’s strategies involving the exploration of
knowledge from external parties, while outbound strategies (Chesbrough, 2017;
Cheng et al., 2016)
Outbound Outbound strategy refers to a firm’s strategies involving the exploitation and
strategy commercialization of its own internal knowledge (Chesbrough, 2017; Cheng
et al., 2016)
Alliance Alliance management capability refers to a firm’s capacity “to purposefully
management create, extend or modify the firm’s resource base, augmented to include the
capability resources of its alliance partners” (Helfat et al., 2009, p. 66)
Absorptive Absorptive capacity is defined as a firm’s ability to recognize and understand
Table AI.
capacity new external knowledge, assimilate valuable external knowledge and apply
The definitions of assimilated external knowledge (Delmas et al., 2011; Zahra and George, 2002;
key research Cohen and Levinthal, 1990)
variables in this Environmental Environmental uncertainty refers to the rate and unpredictability of change in a
study uncertainty firm’s external environment (Davis et al., 2009)

Corresponding author
Colin C.J. Cheng can be contacted at: cjcheng@gm.ntpu.edu.tw

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