Sustainable product innovation: investment premium and turnover development at the firm level

Sustainable product innovation: investment premium and

turnover development at the firm level

Bastian Termijtelen

S4355083

Supervisor: Dr. P. Vaessen

Second examiner: Dr. ir. S. Witjes

1. Introduction 3

1.1 Sustainable oriented innovation 3

1.2 Sustainable product development 4

1.3 Success factors in product innovation on a firm level 4

1.4 An ecological modernistic approach towards sustainable product innovation 5

1.4.1 Supporting articles for the win-win logic 6

1.4.2 Articles against the win-win logic 7

1.4.3 Possible reasons for inconsistency 7

1.5 Research objective 9

1.6 Research question 9

1.7 Scientific relevance 9

1.8 Societal relevance 10

1.9 Outline of the thesis 10

2. Theoretical framework 11

2.1 When is SPI successful for the firm? 11

2.2 How SPI becomes successful for the firm 12

2.2.1 Enhanced firm performance on the demand-side 13

2.2.2 Enhanced firm performance by costs savings 14

2.3 Investment in success factors described by the resource based view 14

2.3.1 Internal R&D and SPI 16

2.3.2 External cooperation and SPI 18

2.3.3 Non-R&D employee innovation investments and SPI 20

2.3.4 Technological investments and SPI 22

2.4 Conceptual model 23 3. Methodology 25 3.1 Methodological approach 25 3.2 Data selection 26 3.3 Operationalization 26 3.3.1 Independent variable 26 3.3.2 Dependent variables 27 3.3.3 Control variables 28

3.4 Validity and reliability 31

3.5 Method of data analyses 32

3.6 Research ethics 32

4.1 Introduction 33 4.2 Response data 33 4.3 Variabele construction 35 4.4 Univariate analysis 36 4.5 Bivariate analysis 39 4.6 Multivariate analysis 42

4.7 Summary of the findings 49

5. Discussion 50 6. Conclusion 52 6.1 Conclusion 52 6.2 Scientific implications 53 6.3 Practical implications 54 6.4 Limitations 54

6.5 Suggestions for further research 55

References 57

APPENDIX A: Questionnaire 70

APPENDIX B: Assumption testing: 73

1. Introduction

1.1 Sustainable oriented innovation

This thesis will be focus on product innovation as a type of sustainability oriented innovation (SOIs).

Since the Brundtland Commission's report in 1987, that states that poverty causes

unsustainable production and consumption that leads to environmental challenges now and in the future (Keyfitz, 1989), ‘sustainable development’ became widely known in politics and society (Hens et al. 2018; Redclift, 2005). From this moment on, awareness about the importance of sustainable development was raised at which sustainable consumption and production have come into practice (Keskin, Diehl & Molenaar, 2013). Therefore need for environmental innovations within the firm and other parts of society has been increasingly emphasized by policy makers and academics alike in order to solve these environmental challenges (European Commission, 2012; Kivimaa, 2008; Noci & Verganti, 1999; Ölundh Sandström & Tingström, 2008; Porter & van der Linde, 1995; Rennings & Rammer, 2009). As a consequence an academic debate emerged about the different theories towards

sustainable innovation. This debate is about what conceptualization/response is needed to achieve sustainability. Geels, Hekkert and Jacobsson (2008) argue that lots of studies

conceptualize sustainability from one perspective (e.g. economics, or political science). They state that, especially when solving major environmental issues that need radical innovations shifts (e.g. climate change or loss of biodiversity), these response strategies lack crossover elements from different paradigms to conceptualize all key process. Therefore to define sustainability oriented innovation an integration from different disciplines is needed. Therefore to define sustainability oriented innovation the definition of Klewitz & Hanzen (2014, p.1) is used since this definition integrate different disciplines to a large extent (environmental, economical and social) in sustainable oriented innovations (SOIs) and

focuses on the firm level as this thesis will do: ‘’SOIs are about integration of ecological and social aspects into products, processes and organizational structure’’.

1.2 Sustainable product development

Within the literature of sustainable oriented innovations this thesis focus on sustainable product innovation (SPI). Herby many studies use the name green product innovation (GPI) when studying product innovation towards the environment. But given the social and often also economic nature of environmental innovations this thesis find the term sustainable product innovation more applicable since this term integrate all the disciplines involved in these product innovations. The product innovations studied in this thesis are focused on a positive environmental impact which also contain economic and social features. Therefore this product innovations aim to integrate multidisciplinair features as is in line with the current academic debate about sustainable innovation from which the definition of sustainable oriented innovation was derived. Therefore sustainable product innovation is defined by the definition of Pons, Bikfalvi and Llach (2018, p. 38), this definition is chosen since itis closely related to the measurement/data that will be used during this thesis and have the aim for a positive environmental impact containing social (e.g. products with reduced health risks or with less water, air and noise pollution) and economical implications (e.g. better products that yield higher income or more efficient products for consumers).

Sustainable product innovation is defined as ‘’the design, production and implementation of new or significantly improved products that have a positive impact on the environment when in use or when disposing of them’’.

1.3 Success factors in product innovation on a firm level

In order to understand how firms can come to SPI, lots of research has been done on the success factors (Dangelico, 2016; De Medeiros, Ribeiro & Cortimiglia, 2014). As will be further explained in the next chapter, to study successfactors on SPI the resource-based view (RBV) will be used since success factors can be considered as important resources that a firm

needs in order to achieve SPI (Berrone, Gelabert, Fosfuri & Gómez-Mejía, 2008; Christmann, 2000; Dangelico, 2016; Halme & Korpela, 2014; Li, 2014). Generally it is argued that

success factors for SPI do not fundamentally differ from success factors for product

innovation in general, so called conventional product innovation (CPI) since firms conducting SPI do make use of similar resources for product innovation as firms that conduct CPI

(Driessen, Hillebrand, Kok & Verhallen, 2013; Rennings & Rammer, 2009). Whereby, in line with the definition of SPI by Pons et al. (2018), CPI can be defined as ’the design, production and implementation of new or significantly improved products that have no or a negative impact on the environment when in use or when disposing of them’’. While success factors for both SPI and CPI do not significantly differ, the extent of use of the success factors might do. Although not a lot of studies compare the investments in success factors for product innovation between firms that develop SPI and firms that develop CPI, it is argued that conducting SPI requires a higher extent of use in success factors compared to CPI

(investment premium) (e.g. De Marchi, 2012; Driessen et al. 2013; Horbach, Rammer and Rennings, 2012; Noci & Verganti, 1999; Rennings & Rammer, 2009). This study aims to provide more insight into the relative investments in success factors required for SPI against CPI.

1.4 An ecological modernistic approach towards sustainable product innovation

Geels et al. (2008), Langhelle (2000) and York et al. (2003) argue that, current response strategies for sustainable innovations that dominate the academic debate are largely based on their distinct parent theory (e.g. economics or political science) and are too narrow to come to radical innovations needed to solve environmental challenges on a macro-level. Nevertheless, the different parent theories are necessary for the shift towards sustainability and can be considered as subparts of the sustainable innovation journey that form valuable insights on sustainable development (Dangelico, 2016; Dangelico, Pontrandolfo & Pujari, 2013. 2013; Dangelico & Pujari, 2010; European Communities, 2001, p.3; Langhelle, 2000).This thesis goes one step back in the debate about sustainable innovation by focusing on a single response strategy, the so called ecological modernisation paradigm. This paradigm is based on the idea that sustainable innovation will emerge in combination with economic growth the so called win-win logic. When studying the ecological modernistic approach on a meso-level, criticism can be found as well. Since it is argued that a win-win logic sector wise, due to structural changes, involves that some sectors’ societal role and importance must be reduced

and hence these sectors will be the ‘’losers’’ of the shift towards sustainability (Langhelle, 2000). On a firm level therefore there can be a win-win situation for a particular firm but at the expense of another firm(s). This implies that the win-win logic is about competitiveness so that SPI gave a competitive advantage to a firm in comparison to another firm that can result in better performance.

When it comes to the offsetting of additional costs, that occur out of investments in success factors on a firm level, for SPI two different perspectives exist. The standard neoclassical theory argues that improved environmental performance leads to an increase in costs. This perspective is based on the premise that environmental improvements decrease marginal net benefit (Horváthová, 2010). Hereby it is initiated that additional investments in success factors are not compensated by more revenue or less cost. Consequently environmental responsiveness was viewed as involving compliance, trade-offs with other corporate goals and expense that may erode competitiveness. This perspective was challenged over time by viewing environmental responsiveness as an opportunity (Ambec, Cohen, Elgie & Lanoie, 2013; Baker & Sinkula, 2005; Pujari, Wright & Peattie, 2003). The most influencing study in this win-win perspective is that of Porter and van der Linde (1995). Their theory is based on the discussion about the effect of environmental innovations, triggered by environmental regulations, on firm performance. According to Porter and van der Linde (1995), the view that environmental innovation will result in reduced firm performance is incorrect. Instead environmental innovations can lower the total cost of a product or improve its value. They claim that environmental innovations are likely to happen because pollution is a sign of inefficient use of costly resources (e.g. inefficient use of materials and/or labor and other production factors). Besides they state that not only regulators prompt for SPI also customers do, world demand is putting a higher value on resource efficient products. Many firms using SPI to command price premiums for their innovated products and to open up new market segments. This results in a win-win situation whereby the firm enjoys higher performance and other stakeholders profit from more sustainable products.

1.4.1 Supporting articles for the win-win logic

To test whether SPI contributes to one of the two perspectives, the effect of SPI on financial and environmental performance has been analyzed in extant literature thoroughly (Tang, Walsh, Lerner, Fitza and Li, 2018). Dangelico and Pujari (2010) argue that SPI can enhance financial performance because SPI can lead to an array of benefits including increased

efficiency of resources, return on investment, increased sales, development of new markets, improved corporate image, product differentiation and enhanced competitive advantage. When it comes to these benefits SPI is often used as an environmental marketing tool (Fraj-Andrés, Martinez-Salinas & Matute-Vallejo, 2009). For example Baker and Sinkula (2005) find that new product innovation according an environmental marketing philosophy leads to a better market share and hence firm performance. Furthermore, Chen et al. (2006) found that performances of SPI were positively correlated to corporate competitive advantage in terms of costs, product quality, relative R&D strength, managerial capability, growth, first mover advantage and image. Ar (2012) found a positive relation between SPI and firm performance measured by sales growth, market share and return on investment. Palmer and Truong (2017) investigated whether there are any win-win situations in terms of financial advantages for firms, while reducing the adverse impact of new products on the environment. They find a positive relation exists between net income and SPI. Also Tang et al. (2018) found a positive relation between SPI and firm performance in terms of market share, ROI, sales volume, firm image and customer satisfaction.

1.4.2 Articles against the win-win logic

On the contrary are studies that did not find a relationship or even a negative relationship between SPI and firm performance. Dangelico et al. (2013) showed that sustainable product design has a positive and significant impact on the creation of new opportunities (e.g. new markets and technologies). But it turned out that this did not have a significant positive impact on financial outcomes in terms of sales, profitability and cost performance. Also Ölundh Sandström and Tingström (2008) pointed out that an environmentally improved product cannot give competitive advantages and improve market position whenever customers are very conservative in a particular industry. Driessen et al. (2013) did not find evidence in their 8 case studies that sustainability of products resulted in better financial performance in terms of profitability of the innovation compared to industry norms and customer performance in terms of sales or market share relative to competitors. Lanoie et al. (2011) state that reduced environmental impact of products only partially offset the costs of the innovation and therefore did not find support for the Porter hypothesis.

1.4.3 Possible reasons for inconsistency

Most studies on SPI and firm performance do not provide separate information about all the distinct measurements (e.g. what kind of survey questions) used to measure SPI and their

relationship towards firm performance, but rather present SPI as an overarching concept that is derived from a factor analysis. In this way it does not become clear how specific types of SPI are exactly related towards firm performance. An exception in this case is the study of Doran and Ryan (2016) who find that SPI in terms of reduced energy in use and reduced air, water, soil or noise pollution did have positive effect on firm performance measured by turnover per employee. But on the contrary they find a significant lower turnover per

employee for improved recycling of product after use. Therefore, they argue that the validity of the Porter and Van der Linde (1995) hypothesis varies depending on the specific subtype of SPI considered. Also Horbach et al. (2012) confirm this line of thought, they find that material savings and energy saving products had a positive impact on firm performance but that improvement of a products recyclability significantly reduces firm performance because of higher costs. Another reason for inconsistency can emerge whenever no clear benefits for the end customer are visible. Hence it will be harder for firms to communicate the

sustainability efforts of a firm clearly so that demand will rise (Doran & Ryan, 2016; Triguero, Moreno-Mondéjar & Davia, 2013). Another matter of influences on the inconsistency of results on SPI and firm performance is time. Ambec et al. (2013) and Dangelico et al. (2013) argue that it is possible that, during a particular study, the phenomenon of SPI can be at a nascent stage and, it may cost a few years to integrate environmental sustainability issues at the product development before it starts to pay off. Furthermore given the increased awareness towards sustainability the effect of SPI on firm performance is likely to be stronger than some decades ago and will continue to grow (Ambec et al. 2013; Dangelico & Pujari, 2010). Consequently one could argue that the win-win theory will be more valuable in the present compare to the past and will be even more relevant in the future (Ambec et al. 2013).

All in all, literature state that an ecological modernistic approach should be seen as a necessary but not sufficient condition for sustainable development at large. Meanwhile on meso-level, literature state that sector wise, due to the competitive nature of the win-win logic, some firms will lose and some firm will win so that a win-win situation does not hold. On the firm level itself literature remains inconclusive about the win-win logic that predicts a positive relation between SPI and firm performance. This thesis tries to provide a

comprehensive insight into the validity of the win-win perspective of Porter and van der Linde (1995) on a firm level basis by taking into account possible reasons (effect of distinct product improvements, visibility of sustainability efforts and time to offset investments) for

inconsistency. Although the product innovations studied in this thesis integrate

multidisciplinaire features, given the scope and data of this thesis they are evaluated against economic parameters.

1.5 Research objective

Based on the above, this study has the following objective:

Testing the win-win logic of SPI on a firm level basis by gaining more insight into the additional investments in success factors of product innovation for SPI and the effect these investments on turnover development over time of the firm compared to CPI.

1.6 Research question

The objective results in the following research question(s):

Does the win-win logic on a firm level basis holds in terms of (a) the requirements of

additional investments in distinct success factors for SPI up and above these investments for CPI and (b) do this additional investments increase turnover over time compared to CPI?

Based on the research question two sub-questions are designed:

1. To what extent is the amount of SPI implemented associated with higher turnover over time compared to CPI?

2. To what extent requires SPI additional investments in distinct success factors of product innovation compared to CPI?

1.7 Scientific relevance

The scientific relevance of this research can be found in different aspects. First of all not much research has been done on the comparison between SPI and CPI and there required investments in distinct success factors for product innovation, so that additional knowledge can be fruitful. Furthermore a great part of the literature that studies the effect of success factors for product innovation on SPI is solely based on case studies. Therefore additional quantitative research is useful to strengthen the literature.Secondly, empirical research exploring the relationship between SPI and firm performance has so far been inconclusive on a firm level basis and generally cross-sectional (Ambec et al. 2013). Therefore more research is needed to gain more knowledge about the relationship between SPI and firm performance

(Chen, Lai & Wen, 2006; Tang et al. 2018). Furthermore the element of enhanced competitiveness by compared SPI to CPI according the win-win logic has not been

investigated. Finally, although empirical research on SPI has considered market pull factors in general, the concept ‘’number of sustainable product improvements’’, as measurement for SPI implemented, has not been included in empirical studies so far. Only Kammerer (2009) studied some of these products improvements in relation towards SPI implementation, not firm performance.

1.8 Societal relevance

As mentioned before environmental innovations within the firm has been increasingly

emphasized by policy makers and academics alike in order to solve environmental challenges (European Commission, 2012; Kivimaa, 2008; Noci & Verganti, 1999; Ölundh Sandström & Tingström, 2008; Porter & van der Linde, 1995; Rennings & Rammer 2009). Hereby it is argued that through the efficient use of resources, sustainable products can be essential to help society solve these environmental challenges (Dangelico et al. 2013; 2016). For example to reach the Europe 2020 strategy targeting improved environmental impact and boosted innovation (Martens, 2010; Pons et al. 2018). From a firm's perspective, SPI can give a potential competitive advantage due to increased efficiency and better product quality. Besides SPI can raise sales due to differentiation, the development of new markets, that are likely to grow in the future, and improved corporate image (Chen et al. 2006; Dangelico & Pujari, 2010). Also a more sustainable product can have private environmental benefits for the customer (e.g., energy savings) (Kammerer, 2009). So SPI can have potential benefits for firms, consumers and society whenever SPI contribute incrementally as a subpart of a larger sustainable shift, this makes SPI a highly relevant topic from a societal point of view.

1.9 Outline of the thesis

This thesis is structured as follows: The first section will provide a theoretical background for successful SPI and the extent of use of success factors for product innovation.This theoretical background will result in hypothesis and a conceptual model. The second section describes the data gathering method and method of analysis. Thereafter, the analysis itself will be provided so that a conclusion can follow. The final section consist of recommendations and discussion.

2. Theoretical framework

This chapter will further explain whenever SPI can be considered as successful and how it can enhance firm performance. After this the concept of success factors for product

innovation are explained and a theoretical lens for studying those success factors is provided. Furthermore hypotheses for the proposed relations are provided resulting in a conceptual model.

2.1 When is SPI successful for the firm?

To define what successful SPI is, a review of SPI relevant outcomes is helpful. Tariq et al. (2017) ordered outcomes of SPI as followed; economic and financial performance, market performances, competitive advantage and environmental performance. Hereby it is argued that financial performance is the most pertinent outcome of SPI. Dangelico (2016) also ordered outcomes of SPI in terms importance and concluded that market, economic and financial outcomes are most valuable to the firm. For example, Lanoie, Laurent‐Lucchetti, Johnstone and Ambec (2011) even argue that, in some cases, the motivation for investment in environmental R&D may be better characterized as the attainment of equivalent

environmental performance at enhancement of financial performance. This indicates that firms are interested in both outcomes that improve financial/economic performance and environmental performance at the same time (Baker & Sinkula, 2005). Only improving environmental performance is less attractive to the firm, since firms try to offset additional costs that come with developing their innovations (Shrivastava, 1995). Therefore firms value outcomes of SPI the most when they increase environmental improvement, productivity and competitiveness together. As a result, even though literature on SPI uses different

terminologies and outcomes to measure success of SPI, more and more academics agree that to define SPI as successful, antecedents and eventually outcomes of SPI should follow the win-win logic of Porter and van der Linde (1995) (Chang, 2011, 2016, 2019; Huang & Jim Wu, 2010; Ilg, 2019; Lee & Kim, 2011; Li, 2014; Liao & Tsai, 2019; Ma et al. 2018; Pereira de Carvalho & Barbieri, 2012; Palmer & Truong, 2017; Pujari, 2006; Pujari et al. 2003; Rennings & Rammer, 2009; Strannegård, 2000). Therefore on a firm level bases, SPI is considered successful when it leads to more competitiveness in terms of market, economic and financial outcomes (Chen et al. 2006; Shrivastava, 1995). Not surprisingly, in order to measure success of SPI, more and more research on outcomes of SPI view variables that

capture the concept of competitiveness as relevant by measuring for example: market share, sales, reputation, profits, cost reduction and turnover (Baker & Sinkula, 2005; Chang, 2011; Chen et al. 2006; Chiou, Chan, Lettice & Chung, 2011; Dangelico, 2016; Doran & Ryan, 2016; Langerak, Peelen & van der Veen, 1998; Palmer & Truong, 2017; Peng & Lin, 2008; Lin, Tan & Geng, 2013; Ma et al. 2018; Salim et al. 2018; Shrivastava, 1995; Tariq, Badi, Tariq & Bhutta, 2017; Triebswetter & Wackerbauer, 2008; Wagner, Schaltegger &

Wehrmeyer, 2002). Brachert, Dettmann and Titze (2018) argue that turnover as a

measurement for firm performance provides a comprehensive picture on firm development because it contains a firm's revenue. Also Oke, Burker and Myers (2007) emphasize that the most common measure of business performance used in literature is turnover, since it is related to sales generation from innovations or new products. Besides, according the literature studies of Dangelico (2016) and Tariq et al. (2017) this measurement can be considered as relevant measurement of successfulness of SPI since it contains a measurement for

competitiveness. This claim is supported by Triebswetter and Wackerbauer (2008) who state that turnover can be considered as the consequence of any business activity on

competitiveness. As described in the first chapter, the concept of time is important when it comes to financial performance. It may cost a few years to integrate environmental

sustainability issues into product development before it starts to pay off (Dangelico et al. 2013; Horbach et al. 2012). Indicating that studying SPI at a nascent stage will not show effects on firm performance properly (Ambec et al. 2013; Dangelico et al. 2013). Therefore this research will consider turnover development over time as measurement for success of SPI.

2.2 How SPI becomes successful for the firm

As stated before, successful SPI should follow the win-win logic of Porter and van der Linde (1995) by enhancing firm performance. It is argued that SPI can enhance firm performance by offsetting the initial investment costs due to increased revenues because of a higher demand and/or price premiums for sustainable products and by more efficient use of resources that results in production cost savings (e.g. materials, labor and other production factors).

2.2.1 Enhanced firm performance on the demand-side

Schmookler (1966) was one of the first that discovered a positive relationship between market demand and innovation. Afterwards Kleinknecht and Verspagen (1990) tested the Schmookler’s “demand-pull” hypothesis and concluded that, the idea that market demand is an important driver of product innovation is generally accepted. In line with this statement, Horbach (2008) argued that demand is key for creation of environmental innovation as well. Also other studies show that market demand is essential in the firms’ decision to go for more sustainability (e.g. Cambra-Fierro, Hart & Polo-Redondo, 2008; Chang, 2019; Melander, 2017; Doran and Ryan, 2016; Mondéjar-Jiménez, Segarra-Oña, Peiró-Signes, Payá-Martínez & Sáez-Martínez, 2015; Noci & Verganti, 1999; Van Hemel & Cramer, 2002; Welsch & Kühling, 2009; Zailani, Govindan, Iranmanesh, Shaharudin & Chong, 2015). Whereby firms mostly profit from a higher willingness to pay by customers that value sustainable products (Bhate & Lawler, 1997). For example, Guagnano (2001) reports that 86% of customers will pay more for household products that are less harmful to the environment. Similarly, Manget, Roche & Münnich (2009) found that consumers are willing to pay more for sustainable goods, especially when it comes to ingestible goods (e.g. food and medicine) and plug-in-products (e.g. electronics). Besides the willingness to pay, SPI can enhance a firm's image that can give a firm competitive advantage and product differentiation since customers perceive the firm as being sustainable and value this (Rennings, 2000; Rennings & Rammer, 2009). Moreover, firms recognize that their sustainable image strongly enhances customer trust (Chen, 2010), and that affects customer purchasing behaviors in favor of sustainable products (Nuttavuthisit & Thøgersen, 2017). Kammerer (2009) describes that SPI can affect firm performance by generating a stronger consumer demand due to the introduction of private environmental benefits for the customer, in terms of product improvements (e.g. energy savings and improved product durability). Concluding that the more potential for customer benefits a firm attributes to an environmental issue, the more likely it is that the firm implemented SPI. This indicates that firms are interested to implement SPI whenever customers are more willing to buy these products due to enhanced customer benefits. This conclusion suggests that implementation of SPI is both interesting for customers and firms since customers buy better products and firms enjoy a higher demand, following the win-win logic of Porter and van der Linde (1995). Hwang, Chen, Chen, Lee & Shen (2013)

complement this idea and found that eco-design capability is not only about minimizing the environmental impact through product design, but also avoids compromising the desirable traditional product attributes such as functionality, look and feel. This attributes are visible

and part of the product improvements in this thesis as well. Therefore enhanced turnover is expected because of SPI improvements.

2.2.2 Enhanced firm performance by costs savings

Furthermore Porter and van der Linde (1995) argue that SPI should lead to less costs by enhancing efficiency. They claim the following when it comes to SPI ‘’Such innovations allow companies to use a range of inputs more productively – from raw materials to energy to labor – thus offsetting the costs of improving environmental impact and ending the stalemate. Ultimately, this enhanced resource productivity makes companies more competitive, not less.’’ (Porter & van der Linde, 1995, p.120). So besides enhancing firm performance on the demand side, Porter and van der Linde (1995) state that reduced

(production)costs can help firms to offset their additional investments made in success factors for SPI. Therefore also costs per unit will be accounted for in turnover development since costs can influence price and therefore turnover (e.g. lower costs can cause firms to lower price or higher costs can increase price).

All in all due to increased demand and cost saving established by SPI, the win-win logic implicates that a firm will become more competitive so that performance will increase. This indicates that sustainable product innovators have an competitive advantage compared

conventional product innovators in there markets. Consequently, as is in the core of the critics about the win-win logic, some firms will lose and some firms will win (Langhelle, 2000). The win-win logic therefore predicts that sustainable oriented innovation ‘’wins’’ compared to conventional innovations. All in all this results in the following hypotheses:

H1: SPI is stronger associated with increased turnover development compared to CPI. 2.3 Investment in success factors described by the resource based view

As already briefly described in the previous chapter, achieving successful product innovation depends on capabilities, resources and assets that the firm holds (Berrone et al. 2008;

Christmann, 2000; Dangelico, 2016; Halme & Korpela, 2014; Li, 2014). When it comes to describing these capabilities, resources and assets, the resource-based view (RBV) can be considered as a useful theoretical lens to gain more insight into the way firms achieve

successful outcomes of SPI (Dangelico, 2016; Salim, Ab Rahman & Wahab, 2018; Vachon & Klassen, 2008). The RBV of the firms has its origin in the work of Wernerfelt (1984) and has

subsequently been developed by other academics (e.g. Barney 1991; Grant, 1991; Manhoney and Pandian, 1992). According to Barney (1991) the RBV states that due the heterogeneity and immobility of resources firms can develop potential for sustained competitive advantage. Whereby essentially resources (e.g. assets or knowledge) enable the firm to implement strategies that improve its efficiency and effectiveness. Furthermore capabilities are basically the capacity to actually implement a particular strategies (Amit and Schoemaker, 1993). Finally when this strategies are not simultaneously being implemented by any competitors and when these other firms are unable to duplicate the benefits of this strategy this will gain a sustained competitive advantage (Barney, 1991). This implications of the RBV is the same as for the win-win logic since both are based on competitiveness. The idea that a strategy, in this case SPI (e.g. differentiation or cost efficiency), will yield competitive advantage over other firms, in this case conventional product innovators. The resources needed to come to SPI are the additional successfactors required. If SPI is complex enough than this innovations can bring sustained competitive advantage since they are hard to duplicate. Given the

multidisciplinary nature of SPI’s this is likely be the case. Therefore the RBV suits the win-win logic very well in studying SPI. Not surprisingly, Tariq et al. (2017) state that the RBV is the most recognized and frequently used theory in sustainable innovation management

research. Therefore, based on the resource based view success factors for product innovation can be defined as ‘’resources, that a firm is able to deploy, controlled by a firm that enable the firm to conceive of and implement strategies that improve both sustainable and

conventional product innovation’’.

Based on the literature study of Dangelico (2016) the following variables can be identified as the most important success factors that can lead to SPI; conducting internal R&D and

knowledge flows from and towards external actors. When it comes to external knowledge flows, this thesis will not consider (non-R&D) employees as external knowledge flows, as was done by Dangelico (2016), since employees are often identified as internal knowledge sources in literature (e.g. Kawamura, Eisler & Banerjee, 2013; Prabhu, Chandy & Ellis, 2005; Verona, 1999). Also, by studying investments in internal knowledge flows, non-R&D

employees are considered whereas external knowledge flows are considering external cooperation so that this variables are different from each other. Therefore in this thesis knowledge flows are divided into investments in non-R&D employees in terms of training (internal knowledge flows) and external cooperation (external knowledge flows) to give a more comprehensive view on the concept of knowledge flows. Furthermore, to complement

the investments in internal R&D this thesis will analyze investments in process technologies for SPI and CPI as well. Since literature in the field of product innovation describes that process technologies are critical to the development of product innovation (Linton & Walsh, 2008; Utterback, 1994). Hence, only considering investments in internal R&D does not provide the entire view of investments that are required to come to SPI. Since rich data on investments in process technologies like automatisation, IT technologie and additive production and technologies are provided this techniques will also be considered. As was described in the first chapter, success factors for SPI can also result in CPI since the success factors between the two types of product innovation do not differ significantly, only the expected use of resources might be different for SPI and CPI. As will be discussed in more detail in this chapter, the difference in relative investments in success factors may exists because sustainable product innovators search for innovation impulses more broadly, need to invest in continuous R&D practices and in new technologies that lie beyond the traditional scope. With this technological investments sustainable product innovators need different stakeholders in order to solve technology-related issues compared to conventional product innovators (Driessen et al. 2013; Noci & Verganti, 1999; Pons et al. 2018; Rennings & Rammer, 2009). Furthermore it is expected that, in order to break with the traditional view of seeing SPI as trade-offs with other corporate goals and expense that may erode

competitiveness, additional investments in internal knowledge flows in terms of training practices for employees can be important so that opportunities in the field of SPI can be identified (Ambec et al. 2013; Kuo and Wang, 2019). Therefore it is expected that SPI require more investments in success factors than CPI.

In the next section the relative investments in the identified success factors that are required for SPI against CPI will be studied in more detail.

2.3.1 Internal R&D and SPI

Anzola-Román, Bayona-Sáez and García-Marco (2018) argue that the positive influence of internal R&D activities on the generation of product innovation has been well documented by previous literature. To illustrate this, Hitt, Hoskisson, Johnson and Moesel (1996) found that higher levels of investment in R&D was positively related to internal innovation measured by the number of new product announcements divided by the firm’s mean annual sales. In line with this many other authors found the same outcomes for CPI (e.g. Aarstad & Kvitastein, 2019; Kim, Kim, Sawng & Lim (2018; Sharma, Ganotakis & Love, 2010). Also for SPI

different articles are out there to confirm the importance of internal R&D. Horbach (2008) found that eco-innovations (that include new or modified products to avoid or reduce environmental damage) are enhanced whenever a specialized R&D department is present. This relation exists because the improvement of technological capabilities by R&D triggers environmental innovations. The so called ‘’environmental R&D’’ therefore represent an important internal capability for successful energy and resource efficient innovations towards products (Lanoie et al. 2011; Rennings & Rammer, 2009). Also Green, McMeekin and Irwin (1994) indicated the importance of internal R&D for SPI, by arguing that the more ‘’major’’ the technological change is, the more likely it is that the firm was to spend more on R&D. Therefore it is not only common sense that internal R&D is important for product innovation since the aim of a firm’s R&D investments is to leverage innovative outcomes, it is also confirmed in literature throughout (Aarstad and Kvitastein, 2019). Therefore it can be concluded that both types of product innovation make use of this successfactor/resource.

Nevertheless, the articles described above are investigating the effect of internal R&D on CPI and SPI separately from each other. To compare both types not lot of articles are out there. Still some relevant studies made the beginning in investigating the investment intensity of CPI relative to SPI. Rennings and Rammer (2009) studied energy and resource efficient innovations towards products or production processes and found that these kind of

innovations require a significantly higher share in their sales on R&D (about twice as much) compared to the control group that involve innovators in general. This because the share of firms that executed energy and resource efficient innovations had to conduct continuous internal R&D significantly more than firms in the control group. Horbach et al. (2012) focuses on eco-innovations in terms of the production, application or exploitation of a product that is novel to the firm or user and which results, throughout its life cycle, in a reduction of environmental risk, pollution and the negative impacts of resource use compared to relevant alternatives. They measured innovation intensity by total innovation expenses per employee to explain whether eco-innovations are more R&D intensive compared to other innovations. They found that eco-innovations use a higher innovation intensity because of the purchase of new equipment and marketing activities that are more important compared to other innovations. Also Pons et al. (2018) state that sustainable product innovators find inspiration for new product development in the R&D/engineering department more often that conventional product innovators (SPI; 28,3% and CPI; 20,0%). This because sustainable product innovators competing by customisation of their products more often than

conventional innovators so that they make more use of R&D. This results in the following hypothesis:

H2: SPI is stronger associated with internal R&D investments compared to CPI.

2.3.2 External cooperation and SPI

In the previous chapter it became clear that external cooperation (external knowledge flows) can be identified as important success factor for product innovation. Dangelico (2016) uses two definitions to describe external cooperation; that of knowledge flows and collaborations. Both definitions are about generating and exchanging knowledge from different stakeholders. The only difference made is that knowledge flows entail informal ways of knowledge flows and collaborations formal ways. Hence, since most studies do not point out whether

collaboration is formal or informal, those two definitions will be bounded together in the definition of external cooperation. Therefore external cooperation can be considered as leveraging external knowledge sources formally and informally.

When it comes to external cooperation and product innovation the open innovation paradigm of Chesbrough (2003) is one of the most mentioned frameworks. Chesbrough state that it is important for firms to obtain knowledge for (product) innovation from the academic world (universities), other firms (e.g. learn from startups), forming informal alliances to corporate venture capital investments and to listen to customers. For both SPI and CPI external cooperation as a succesfactor/resource is important. Each external cooperation source can deliver an unique input towards the innovation process. Customers can bring in valuable ideas for product innovations so that product design and performance better suits the needs of customers (Bos-Brouwers, 2010; Brown & Eisenhardt, 1997; Chang and Taylor, 2016; Chesbrough, 2003; Dangelico et al. 2013; Green et al. 1994; Lai, Chen, Chiu & Pai, 2011; Pons et al. 2018; Von Hippel, 1978). Collaborations or partnerships between firms can reduce innovation time-span, increase flexibility through short-term joint R&D projects, increase diversity of knowledge and skills and can provide linkages with other actors that help firms to create value by sharing knowledge and increasing speed to market (Dangelico et al. 2013; Frankort, 2016; Hagedoorn, 1993, 2002; Lynch & O'Toole, 2006; Noci & Verganti, 1999; Nooteboom, 2004). Another way to obtain knowledge from other firms is by

knowledge acquisition, buying, licensing or contracting out knowledge and/or technology can enhance product development speed and allows external sources to act autonomously outside

a buyer's organizational hierarchy so that the firm increases the possibility of introducing unexpected opportunities (Dangelico et al. 2013; Gold, 1987; Prabhu et al. 2005; Yan & Azadegan, 2017). Suppliers can be important for external cooperation since they are responsible for key components, resources, R&D expertise that can enhance in house

capabilities, reduced development time for products, improved cost and quality of the product design and enrich perspective (Bos-Brouwers, 2010; Dain, Merminod & Yager, 2019;

Dangelico et al. 2013; Lai et al. 2011; Lau, 2014; Lee & Kim, 2011; Lynch & O'Toole, 2006). Universities and research organizations are able to speed up product development, are relatively cheap compared to consultants and can give insights about customer requirements and market opportunities and open up a vast amount of knowledge (Belderbos, Carree & Lokshin, 2004; Conway & Steward, 1998; Dangelico et al. 2013; Haus-Reve Fitjar & Rodríguez-Pose, 2019; Lai et al. 2011; Lööf & Heshmati, 2002). Although the effect of distinct cooperation sources on SPI is considerably less studied relative to CPI it can be concluded that for both SPI and CPI external cooperation is essential.

As is described above, external cooperation is important for product innovation in general and also for SPI. When it comes to the comparison in extent of use of external partners between sustainable innovators and conventional innovators, some relevant studies has been conducted. Rennings and Rammer (2009) are one of the view articles that gave a more comprehensive picture on SPI vs. CPI towards external cooperation. They studied firms that conducted energy and resource efficient innovations (EREIs) against conventional

innovators. They found that firms with EREIs search for innovation impulses more broadly (i.e. they use more and different information sources) and assign a higher importance to most of these sources. EREI firms more often use competitors, suppliers, universities, public research institutes, scientific publications and industry associations as a source of

information. This search pattern may point to more complex innovation activities that require diverse knowledge inputs (Driessen et al. 2013). Since, for SPI, the environmental impact is present at all phases of the life of a product, co-operation among various firms in the

product’s value chain (e.g. disposal) becomes essential to develop a strategy for a sustainable product (Roy & Whelan, 1992). Also, customers are more frequently chosen as cooperation partners by EREI firms compared to conventional product innovators. They conclude that EREI firms are particular outstanding with regard to their strong focus on open innovation as was described by Chesbrough (2003). Also other studies are consistent with this conclusion. Halila and Rundquist (2011) concluded that firms that adopt environmentally sustainable

innovation practices develop strong partnerships with a range of different stakeholders in order to solve technology-related issues compared to traditional innovation approaches. De Marchi (2012) conclude that, environmental innovative firms cooperate on innovation with external partners to a higher extent than other innovative firms. Furthermore, cooperation with suppliers and universities is more relevant than for other innovators. Since

eco-innovators generally are still inexperienced in developing such innovations and they need to leverage on the expertise of their external partners. Del Río, Peñasco and Romero‐Jordán (2015) argue that environmental innovations require more external sources of

knowledge/information as conventional innovations because they are often characterized by relatively new technologies, where more basic research is needed. They find that this sources are both relevant for radical and incremental environmental innovations. Therefore it is likely that sustainable product innovators will invest more in engagement towards external sources of knowledge compared to conventional product innovators. Considering the

multidisciplinary nature of sustainable oriented innovation as was described by Geels et al. (2008) it makes sense that SPI requires more and diverse input of knowledge compared to CPI (Leiponen & Helfat 2010; Rennings & Rammer, 2009). Besides Geels et al. (2008) argued that barriers for sustainable development (including SPI) are higher compared to other innovations. Therefore it is argued that to overcome barriers for SPI diverse external source are needed even more than for CPI (Ilg, 2019). Also when pursuing sustainable competitive advantage from a RBV perspective more diverse input enhances complexity and hence duplicability which gave SPI potential for sustained competitive advantage. This results in the following hypothesis:

H3: SPI is stronger associated with investments in different types of external cooperation compared to CPI.

2.3.3 Non-R&D employee innovation investments and SPI

Besides investments related to R&D and R&D employees a lot of articles describe the benefits for investing in all kind of employees (involving non-R&D) as well (e.g. managers and production staff). It is argued that employees, for both SPI and CPI, can be very

important when it comes to product development. This because employees (e.g. in a project team) can positively contribute to product development by importing knowledge and more diverse perspectives from different hierarchies (Chang, 2018; Polonsky and Ottman, 1998; Verona, 1999). In line with this, Andries and Czarnitzki (2014) found that the utilization of

employees’ ideas in the product innovation process has a positive effect on (small) firm’s innovation. Since new product introduction rate is a function of a firm’s ability to manage, maintain and create knowledge and a critical portion of this knowledge required for

innovation resides with individuals. Whereby product innovation was measured as the share of current sales obtained with innovative products in the last 3 years. Another example in the field of SPI, Blazejewski and Dittmer (2016) introduce the concept of employee-driven eco-innovation (EDEI), the idea that ordinary employees’ voluntary engage in eco-innovation activities within an organizational context that, intentionally or not, lead to environmental improvements. They found that in this way employees can possess environmental knowledge and skill relevant for SPI. In order to enlarge the utilization of employees as a knowledge source for product innovation, investments in training for employees are vital. According to Caloghirou, Giotopoulos, Korra and Tsakanikas (2018) training of employees can stimulate internal flows of knowledge and can result in relevant future actions for knowledge

generation. They state that ‘’investments in training programmes of employees enable the identification and assimilation of knowledge at the firm level, the development of

professional skills and expertise, and the generation of boundless ideas for further innovative attempts’’ (Caloghirou et al. 2018. p.343). Besides the Caloghirou article many more authors highlight the role of training (of all kinds of employees) towards enhancement of knowledge and product innovation (e.g. Beugelsdijk, 2008; Dangelico et al. 2017; Freel, 2005; Gallié & Legros, 2012; Ilg, 2019; Laviolette, Redien-Collot & Teglborg, 2016; Lin & Ho, 2008; Zahari & Thurasamy, 2012). Hence, it can be concluded both SPI and CPI make use of non-R&D employees as successfactor for product innovation.

As in the core of the win-win logic of Porter and van der Linde (1995), firms often fail to break with the traditional view of seeing SPI as trade-offs with other corporate goals and expense that may erode competitiveness since firms often act within their habits and routines, are risk averse, bounded rational and resistant against costly changes (Ambec et al. 2013). This can be seen as an barrier for SPI that is less present for CPI. Therefore Ambec et al. (2013) emphasized that, especially for SPI, investing in training is important so that managers and/or other employees can identify the so called ‘’low-hanging’’ fruits, that can be seen as profitable opportunities for SPI that are easy to pursue. In line with this Aguilera-Caracuel and Ortiz-de-Mandojana (2013) point out firms conducting sustainable innovation increase training costs relative to conventional innovators. Also Kuo and Wang (2019) describe that so far employees are usually not trained to recognize the environmental and social impact of

their products. They argue that sustainability considerations in product design can be seen as a distinct perspective in terms of customer requirements. Furthermore, Driessen et al. (2013) argue that SPI requires a relative complex knowledge base so that training can be fruitfull. Therefore training in the development process of sustainable products is highly relevant compared to training for CPI. This results in the following hypothesis:

H4: SPI is stronger associated with investments in employee training practices compared to CPI.

2.3.4 Technological investments and SPI

When it comes to the relevance of technological investments and product innovation for both SPI and CPI lots of implications are possible. For instance, Robot/automation can deliver higher product quality or variety, or both (Galván, Quispe, Grados & Cordova, 2018; Graetz & Michaels, 2018). Chen, Fuhlbrigge and Li (2008) state that the use of robots for painting of automotive or furniture can significantly increase product quality. They argue that with the right path planning of robots the distribution of the paint can be optimized so that quality of the paint will enhance. For SPI robots and automation can offer applications as well. Chen et al. (2008) argued that robots can consistently configure paint distributions. In this way cars and furniture can be better resistant due to the paint quality. This can enhance life time of the product. This kind of consistency can of course be applied to many products in order to come to SPI. Micro system technologies can fasten prototyping in order to approve product

development, improve shape complexity, dimensional accuracy, replication fidelity, material variety combined with high-volume capabilities and cost savings by more efficient use of materials (Abdullahi, Choudhury & Azuddin, 2015; Attia & Alcock, 2011; Becker, Czerner, Ostendorf, Stippler & Matteazzi, 2005). For micro technology SPI applications are also present, Lenz et al. (2012) found that powder injection molding as an microfabrication technique enables the processing of silicon nitride that exhibits high hardness. This material is enables engines to operate at higher temperature with reduced heat loss relative to metal components, resulting in increased fuel efficiency. Nanotechnologies is another technology that is highly relevant for product innovation since nanotechnology is able to make small modifications to an entire production process so that structure, chemical compatibility, thermal operating range of products and even molecules can be changed resulting in new or diversified products (Bowyer, Pepke, Howe, Fernholz & Groot, 2016; Devalapally, Chakilam & Amiji, 2007; Linton & Walsh, 2008). Also nanotechnology can give potential for SPI, for

example Bowyer et al (2016) also showed that nanotechnologies can build cellulose wood products with improved biodegradability and renewability. The same applications for both product innovation in general and SPI can be found for biotechnology (Belem, 1999; Evens, 2016; Frazzetto, 2003), application of alloys (Baranov, Sidelnikov, Zenkin & Voroshilov, 2018; D’Errico, Rivolta, Gerosa & Perricone, 2008; Inoue and Takeuchi, 2011), additive manufacturing techniques (AM) (e.g. 3D printers that print products or electron beam melting (EBM), which melt metallic powder layer by layer) (Laverne, Segonds, Anwer & Le Coq, 2015; Mawale, Kuthe & Dahake, 2016; Rosen, 2007) and information technology (Doran & Ryan, 2016; Ilg, 2019). All in all in becomes clear that investment in diverse technologies are highly relevant for both SPI and CPI so that both make use of this succesfactor.

Comparing the two types of product innovation Horbach et al. (2012) state that eco-innovations are characterized by higher innovation intensity, consequently the purchase of new equipment and software are more important compared to other innovations. Besides the study of Horbach et al. (2012) not much research is done on the comparison which implicates the need for more research in this field. Nevertheless, as is in the heart of the Porter

hypothesis, it is difficult to identify opportunities for SPI since a lot of firms do not have a lot of experience in the field of SPI. Therefore investments in technological intelligence systems that can sense early weak drives in the whole supply value chain can be highly relevant (Horbach et al. 2012; Noci & Verganti, 1999). In line with this Noci and Verganti (1999) state that the implementation of sustainable innovations usually implies investing in many different technologies that lie beyond the firm’s traditional scope. This because sustainable innovations require proactive investment in core competencies that provide the necessary flexibility to react to an environmental issue. This suggests that SPI requires more

investments in diverse techniques than CPI does since SPI needs to break with the traditional scope and barriers of the firm and requires highly sensitive intelligence systems for IT. This results in the following hypothesis:

H5: SPI is stronger associated with a greater number of different technological investments compared to CPI.

All in all it became clear that, in general, success factors for SPI do not fundamentally differ from success factors for CPI. Since firms conducting SPI do make use of similar resources for product innovation as firms that conduct CPI (Driessen et al. 2013; Rennings & Rammer, 2009). Nevertheless, literature indicates that the extent of use of these success factors

between sustainable product innovators and conventional product innovators may differ. Hence, it is expected that firms who conduct SPI are using these success factors to a higher extent and therefore made an investment premium relative to conventional product innovators (e.g. De Marchi, 2012; Driessen et al. 2013; Horbach et al. 2012; Noci & Verganti, 1999; Rennings & Rammer, 2009). Concretely, in this thesis it is predicted that SPI goes along with investment premiums subsequently for internal R&D, different external cooperation partners, employee training practice and the number of different technologies used. To compensate for these additional investments it is expected that SPI positively influence turnover development due to increased revenues because of a higher demand and/or price premiums for sustainable products and by more efficient use of resources that results in production cost savings (e.g. materials, labor and other production factors) compared to CPI. Hence the win-win logic of Porter and van der Linde (1995) will be supported. Out of this the following conceptual model appears:

3. Methodology

This chapter will first indicate the methodological approach for this thesis followed by the way data will be collected and used for operationalisation of the variables stated in the conceptual model. Furthermore attention will be paid towards validity and reliability of the measurements and the method of data analyses used for testing the hypotheses. Finally some research ethics will be evaluated.

3.1 Methodological approach

This thesis makes use of a non-experimental correlational research design which means that the data will be analyzed so as to look at relationships between naturally occurring variables (Field, 2013, p.872). Furthermore the research design can be considered as deductive since it tests hypothesis based on existing theory (Rahi, 2017). To analyze the relationships between variables this thesis will conduct a quantitative approach whereby the data obtained are analyzed by using statistical software, in this case SPSS statistics. The quantitative approach is most suitable since, in this thesis, evidence for the predicted relationships are measured through variables that produce numeric outcomes (Field, 2013, p.882). Also Bleijenbergh (2013, p.35) states that a quantitative approach is most suitable when testing whether a relationship exist between certain variables. In line with this thesis, Yilmaz (2013) state that, by using this numeric outcomes, quantitative research aims to develop explanatory universal laws in social behaviors by statistically measuring the static reality. In this way causal relationship, based on a priori theories, between variables within the conceptual framework

are measured. Whereas qualitative research explores what is assumed to be a socially

constructed dynamic reality emphasizing more an in-depth description of a phenomenon from the perspectives of the people involved. Therefore focuses more on the ‘’how question’’ about social experience and their meaning that are interpretative and explorative in nature (Yilmaz, 2013; Walker, 1997).

3.2 Data selection

In order to answer the research question by verifying or falsifying the hypothesis, data from the questionnaire ‘’Modernisering van de productie enquete 2015’’ (modernising production questionnaire 2015) will be used. This questionnaire was conducted by the Radboud

University Nijmegen in 2015 and was held among Dutch manufacturing firms from a variety of industrial sectors that employ at least 10 people. Every distinct establishment of a

particular firm was surveyed. The questionnaire aims at gaining more insight in the way Dutch manufacturing firms modernize their products and production processes. Hence this questionnaire contains rich data about turnover development and the identified success factors for product innovation on firm level so that it can be suitable for answering the research question. Since this thesis aims at gaining more insight into additional investments in success factors for product innovation for SPI compared to CPI and the effect of SPI implementation on turnover development of the firm, only firms that introduced new to the firm or drastically renewed (in terms of materials used and product function) products will be part of the sample.

3.3 Operationalization

3.3.1 Independent variable

As pointed out in the first chapter SPI was defined according the definition of Pons et al. (2018, p.38) ‘’the design, production and implementation of new or significantly improved products that have a positive impact on the environment when in use or when disposing of them’’. In line with this definition, to measure the amount of sustainable product

improvements six different product improvements, introduced since 2012, that have a positive impact on the environment when in use or when disposing of them will be used as

measurement with example items being product improvements resulting in ‘’reduced energy in use’’, ‘’reduced air, water, soil or noise pollution’’ and ‘’reduced health risk in use’’ that have a multidisciplinary impact. Therefore number of sustainable product improvements can range from 0 to 6. Whenever a firm reported that it improves a product without having a positive impact on the environment this firm is considered a conventional product innovator. Firms that claimed to have sustainable product innovations but did not report any of the six product improvements will not be part of the sample, since it cannot be verified whether the improvements made can be considered as SOI.

3.3.2 Dependent variables

Turnover development

In order to measure the success of SPI turnover will used as performance indicator since turnover provides a comprehensive picture on firm development because it contains a firm's revenue and is related to sales generation from innovations or new products (Brachert et al. 2018; Oke, 2007). Turnover development will be measured by the difference between the annual turnover for 2012 and 2014 in percentage so that bigger firms do not bias the analysis with large amount of change in turnover in euros. The ratios in terms of percentages of change in turnover will be categorized in ten equal categories to make results better interpretable. Therefore firms can score 0 to 10 on turnover development.

Internal R&D investments

To measure the investments made in internal R&D, the percentage of R&D employees to total employee count will be measured. Measuring the R&D ratio instead absolute of

numbers of R&D employees better reflects a firm’s commitment to internal R&D and makes comparison possible. Furthermore the ratio controls for size effects and improved

heteroscedasticity (Chen & Hsu, 2009).

Investment in external cooperation

Brettel and Cleven (2011) state that lots of research measured external cooperation by a single-item dummy variable (e.g. De Marchi, 2012). They argue that analysing this variable in more depth is necessary in order to achieve more convincing results. In line with this, 8 items on external cooperation will be used. They measure to what extent firms work together with different stakeholders in terms of purchasing, production, selling, service and R&D (yes

or no). Furthermore firms were asked how often they cooperate with other external

organizations (non-customers) for innovation and how often they acquire intellectual property in terms of licences from other organizations. These two items are measured on a three point likert scale ranging from never, once to often. Only firms that answered ‘’often’’ are

considered to make use of this external corporations source. Therefore firms can score 0 to 8 when it comes to number of external cooperation partners.

Investment in training practices for (non-R&D) employees

Investment in training practices for (non-R&D) employees will be measured by the number of different training programs offered by the firm. These training programs are for example training for specific skills (e.g. machine maintenance), interdisciplinair training (e.g. training in language and leadership) and on-the-job training (e.g. taskroation and exchange of

experience) etc. Measuring investment in training practices by in total six training types is in line with the theory of Laviolette et al. (2016) and Liao and Tsai (2019) who argue that the distinct training programs are highly relevant in idea generation for products. Also a more comprehensive insight is given compared to only measuring with a single-dummy variable. Given the six different training programs firms can score 0 to 6 when it comes to investment in training practices for (non-R&D) employees.

Technological investments

The amount of technological investments made by a firm will be measured by the number of technologies applied in the firm. Measuring number of technologies applied is a good way to get insight into how committed firms are when it comes to technological investments since application of technologies results directly out of investment in this technologies (e.g.

Bowyer, 2016; Evens, 2016: Graetz & Michaels, 2018). In total 19 different technologies will be measured that were introduced since 2012 till 2014 so that they can be useful for product innovation. As was described in the previous chapter, these technologies are in the field of robot/automation (2), processing technologies (micro system, nano, and bio technologies and alloys technologies) (5), additive manufacturing techniques (e.g. 3D printers that print

products or electron beam melting) (4) and IT technologies (8). Hence firms can score 0 to 19 on this variable.

This thesis includes control variables, which are variables that are not included in the analysis but for which differences are expected or proposed. By including control variables in the analysis, additional groups are controlled for that are more homogeneous and increase the chance of showing significant differences (Hair, Black, Babin, Anderson & Tatham, 2010. p.666).Firstly, industry will be used as control variable since industries differ in their need for innovation. For example high-tech industries tend to innovate more than low-tech industries (González Miles-Touya & Pazó, 2016). Furthermore industries may differ in impact of policy restrictions and consumer awareness that can influence investments in product innovation (De Marchi, 2012). Also firm size will be used as control variable since innovation characteristics differ depending on firm size. González et al. (2016) argue that larger firms tend to invest more in R&D efforts than do smaller firms. Furthermore, Leonidou, Katsikeas and Morgan (2013) argue that large firms, in terms of the number of employees, are more visible and under greater stakeholder pressure to implement SPI. Ettlie and Rubenstein (1987) argue that firm size can influence product innovation. They state that up to a certain point, large firms with greater resources are more likely to commercialize radical product innovation successfully. But that very large organizations are unlikely to radically innovate. Firm size will be measured by number of employees a firm has in 2014 as is done in most of the articles that use this variable (e.g. Ettlie and Rubenstein, 1987;

Leonidou et al. 2013). According the number of employees firms will be divided in different categories in order to make the numbers better interpretable. To continue, two control groups are set up, firms that conduct CPI and firms that do not reported product innovation. So that differences in innovation activity can be evaluated in more detail.

Overview of used measures:

Variabele Variable description Appendix A

Independent:

Number of sustainable product improvements

Number of product improvements since 2012 that have a positive impact on the environment when in use or when disposing (0 to 6).

Dependent:

Turnover development Difference in annual turnover for 2012 and 2014 in percentage that will be divided into 10 equal categories (0 to 10).

Question no. 21

Internal R&D investments Percentage of R&D

employees to total employee count .

Question no. 15

Investment in external cooperation

Number of different external cooperation activities

conducted by the firm (0 to 8).

Question no. 6 and 11

Investment in training practices for (non-R&D) employees

Number of different training programs offered by the firm (0 to 6).

Question no. 5.2

Technological investments Number of technologies applied by the firm since 2012 (0 to 19).

Question no. 8.1

Control:

Industry Type of industry. Question no. 1.2

Firm size

categories based on number of employees in 2014 (0 to 5).

Question no. 21

Externally oriented R&D Degree of externally conducted R&D.