research. The extant research on product innovation addresses the topic of how in-formation from the external environment is integrated in product innovation strategy by studying the impact of customer and competitor orientation on product innovation (e.g. Gatignon and Xuereb 1997; Han et al. 1998; Lukas and Ferrell 2000; Langerak et al. 2004), the R&D-marketing interface (e.g. Gupta et al. 1986; Pinto and Pinto 1990; Griffin and Hauser 1996; Leenders and Wierenga 2002) and the role of
cus-tomers in product innovation (e.g. Von Hippel 1978; Griffin and Hauser 1993). Cus-tomers and competitors are the two stakeholders of the firm that are most recognized when studying how external information is integrated in product innovation strategy.
This is not surprising because customers and competitors are two essential compo-nents of any free market in which a firm sells its products, and it stands to reason that information about these two components is crucial for product innovation. Market stakeholders are stakeholders that take part directly in the exchange processes on the product market in which the firm sells its products. A stakeholder is defined as “any group or individual who is affected by or can affect the achievement of an organiza-tion’s objectives” (Freeman 1984). This definition implies that the firm’s stakeholders are not restricted to its product markets. Research in product innovation has much less, however, studied how to deal with complex environments involving multiple stakeholder groups, including both market stakeholders and non-market stakeholders, such as regulators and special interest groups (SIGs). Resource-dependence theory provides some insights in how firms give meaning to complex environments, such as environments in which both market and non-market stakeholders play important roles.
Challenges in Dealing With Complex Environments
Dealing with complex environments entails environmental enactment (Weick 1969), the process of giving meaning to the environment. Pfeffer and Salancik (1987) point to four types of challenges in environmental enactment, that provide a theoretical un-derpinning to some of the results of the theory-building cases: scope, scrutiny, com-mitment, and balancing (the four labels are not by Pfeffer and Salancik, but are used here for clarity of presentation).
1. Scope: acknowledging all important stakeholders. By misreading the interde-pendence of the organization with stakeholder groups, organizations can fail to at-tribute importance to stakeholders with possibly detrimental results (Pfeffer and Salancik 1987). By limiting its efforts on market stakeholders, academic research on product innovation does not yield insight in how firms are coping with this challenge.
2. Scrutiny: ensuring that stakeholders are not misread. Even if all important stake-holders are recognized, essential information about these stakestake-holders may be not collected, filtered out, or altered, leaving an organization unprepared to face pos-sible threats to survival (Pfeffer and Salancik 1987). Scrutinizing environmental information should allow the firm to be pro-active rather than reactive in product innovation (Urban and Hauser 1993). If research does not address the scrutiny that firms apply in collecting and interpreting information for product innovation, it may lead to an incomplete understanding of how market orientation impacts product innovation (Slater and Narver 1998).
3. Commitment: overcoming inertia. Firms may identify important stakeholders and read their interests correctly, and yet fail to adapt to their environments because they are committed to their past (Pfeffer and Salancik 1987). A lack of commit-ment to make the necessary changes in response to environcommit-mental information is
potentially harmful to the firm. Organizational inertia is an important reason why information about the environment is not used in product development (Adams et al. 1998).
4. Balancing: conflicting interests of stakeholders. Satisfying one stakeholder group might run contrary to the interests of another group (Pfeffer and Salancik 1987).
Mechanisms for balancing interests in product innovation, especially when many stakeholders are involved, could include cross-functional coordination or priority setting. The latter two are typically not investigated as balancing mechanisms, however.
In studying how firms deal with complex environments, each of these four chal-lenges, and how firms try to overcome them, needs to be addressed.
Relevance for GPIs
GPIs offer an interesting arena for research into the integration of market and non-market stakeholders in product innovation strategy because all four challenges in en-vironmental enactment present themselves simultaneously. The issue of scope is par-ticularly salient because GPIs involve a complex and diverse set of important stake-holders, as witnessed by the results of the theory-building case studies. Regulatory stakeholders, for instance, have an interest in containing the environmental effects of products (e.g. the EPA’s Energy Star program). A more elaborate set of important stakeholders increases the likelihood of conflicting interests between stakeholders, thus increasing the need for balancing of interests.
The definition of GPIs in Chapter 1 allows products to differ in ‘greenness’; a green product is a relative rather than an absolute notion. If the level of greenness is allowed to vary, this implies that it can be traded off against other product characteristics.
Moreover, many authors have observed an inherent conflict between economic inter-ests (e.g. of shareholders, an important stakeholder group) and green issues (e.g. of SIGs) (e.g., Walley and Whitehead 1994; Chen 2001). Such trade-offs were also found in the theory-building case studies, e.g. in greenness versus product costs.
Firms engaging in GPIs are balancing green versus non-green issues in their devel-opment process, product characteristics and introduction strategies. In addition to scope and balancing being particularly salient in GPI innovation strategy, scrutiny is proven to be relevant in the theory-building case studies as well as the literature. Over the last decades, firms have frequently misread stakeholders’ interests when introduc-ing GPIs, causintroduc-ing a subsequent backfire (Ottman 1998), as witnessed by the Hefty Degradable trash bags example in Chapter 1. Firms have also been shown to have varying levels of commitment to integrate green issues in their strategies (Banerjee et al. 2003). Therefore, results from research in GPIs can be a fruitful source for under-standing how firms are integrating market and non-market stakeholders in their prod-uct innovation strategies. The next section will review research relating to each of the four challenges in environmental enactment in the domain of product innovation strategy, thereby integrating results of ‘conventional’ product innovation research and research specifically directed to GPIs.