Does stakeholder engagement promote sustainable innovation orientation?

Purpose - The purpose of this paper is to focus on the contribution of stakeholder engagement to firms' innovation orientation within the context of sustainable development. It investigates whether engagement with different stakeholders promotes sustainable innovation. Design/methodology/approach - The empirical analysis is based on an international sample of 656 large companies, drawn from the annual assessment for the Dow Jones Sustainability Indexes. A logistic regression analysis was performed in order to test the hypothesized relationships between stakeholder interaction, knowledge management and sustainable innovation orientation. Findings - Empirical results showed that knowledge sourced from engagement with internal and external stakeholders contributes to a firm's sustainable innovation orientation, but that this knowledge has to be managed by the firm internally in order to be converted into new ideas for innovation. Research limitations/implications - Since the present study represents one of the first attempts to characterize stakeholder-driven innovation in a quantitative way, there are some limitations related to the used database that should be addressed in future research. Practical implications - The results show the importance for companies of connecting the business functions of stakeholder engagement and innovation, and find flexible mechanisms to combine access and transformation of relevant stakeholder information. Originality/value - The main contribution of the present research is to prove quantitatively that engagement with different stakeholders is a valid mechanism for promoting sustainable innovation within firms. This is done with a unique dataset, the SAM Group database. In addition, the present study will advance understanding on firm's sustainable innovation processes by framing this phenomenon as an organizational capability.