Business models for sustainable innovation: state-of-the-art and steps towards a research agenda

Abstract

The aim of this paper is to advance research on sustainable innovation by adopting a business model perspective. Through a confrontation of the literature on both topics we find that research on sustainable innovation has tended to neglect the way in which firms need to combine a value proposition, the organization of the upstream and downstream value chain and a financial model in order to bring sustainable innovations to the market. Therefore, we review the current literature on business models in the contexts of technological, organizational and social innovation. As the current literature does not offer a general conceptual definition of sustainable business models, we propose examples of normative requirements that business models should meet in order to support sustainable innovations. Finally, we sketch the outline of a research agenda by formulating a number of guiding questions.

Introduction

In the past decade, research on sustainable innovations has expanded rapidly to increase our understanding of the ways in which new technologies and social practices enable societies to become more sustainable. Earlier special issues of this journal have focused on eco-innovation (Hall and Clark, 2003) and the diffusion of clean technologies (Montalvo, 2008). Also, in the past decade coherent perspectives have been introduced that look more systemically at the ways in which more sustainable technologies are adopted in society, such as transition management and innovation systems research (see Coenen and Diaz-Lopez, 2010 for a comparative overview). This research has contributed to our knowledge of factors that induce sustainable innovations, such as regulation and firm characteristics, and also show the interplay of factors in innovation and societal systems that determine the often complex journey of new ideas into products and services (Geels et al., 2008).

While an innovation is often distinguished from an invention by the additional condition of successful market introduction, the actual way through which firms succeed in bringing an invention to the market is relatively unexplored (e.g., Teece, 2006; Chesbrough, 2007a). While this issue is gaining increasing attention in the “mainstream” literature (Baden-Fuller et al., 2010), it is still underexplored in the field of sustainable innovation (Charter et al., 2008; Schaltegger et al., 2012; Tukker and Tischner, 2006; Wells, 2008).

In this article we focus on this gap. We look not so much at products or services themselves, nor at their physical attributes and sustainability impacts. Instead we focus on how business models and sustainable innovations interrelate and what can be learned from the current scientific literature. We search for links between sustainable innovations and the business model concept. The latter concept, which is drawn from the field of business management, captures key dimensions of successful market introduction: it specifies how a firm is able to earn money from providing products and services. This includes not only the value proposition to customers, but also the value creating constellation in which the firm connects to suppliers and acquires resources in a profitable manner. We propose that these elements are crucial for making sustainable innovations successful.

The questions we seek to answer in this article are:

What does the current scientific literature reveal about the interrelations between business models and sustainable innovations?

How can the business model perspective help to define future topics for research on sustainable innovation?

By answering these questions, we contribute to the literature in three ways. First, we provide insight into the ways in which the sustainable innovation literature currently lacks attention towards aspects that are crucial for successfully marketing innovations. These elements are provided by incorporating the business model literature. Secondly, we propose a set of normative requirements under which business models for sustainable innovation should operate. Thirdly, we present a research agenda for sustainable innovation that incorporates the elements of business models.

While we focus on forging a link between sustainable innovation and business models in research, this link is also relevant for practitioners. As will become clear, the business model perspective reveals a number of components that need to be actively managed in order to “create customer and social value by integrating social, environmental, and business activities” (Schaltegger et al., 2012, p. 112).

We proceed by introducing the business model as a market device that is closely related to innovation (Section 2). Section 3 summarizes the literature on sustainable innovation and identifies three relevant levels of analysis: the organizational, inter-organizational and societal level. In combination with insights from early considerations of sustainable business models these lead us to propose basic normative requirements for business models that facilitate sustainable innovations (4.1). These basic requirements are then further developed, based on literature revealing general barriers to marketing sustainable innovations (4.2) and current literature dealing with business models for technological, organizational and social innovations (4.3). Section 5 reflects the main findings from our review and Section 6 concludes with five key questions for setting up an agenda for research on sustainable innovation that integrates the business model perspective.