Environmental Management Systems and Environmental Product Innovation: The Role of Stakeholder Engagement

Environmental product innovation (EPI) is an imperative for contemporary business as it enhances firm competitiveness and provides significant societal benefits. Arguments that the use of environmental management systems—such as ISO 14001—may enhance EPI have not been empirically supported. In this study, we argue that the environmental management systems–EPI relationship is contingent upon the level of a firm's engagement with three groups of stakeholders, namely, suppliers, customers, and the local community. Using a sample of 1,314 manufacturing firms for the period 2003 and 2014, we find empirical evidence that supports our hypothesis for all three groups of stakeholders. Further analysis reveals that for firms with prior experience with quality management systems, engagement with local communities becomes the critical condition. We discuss the implications of these results for both theory and practice.