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New research: the moderating role of the dynamic capability of small manufacturing firms

Today’s international markets are saturated with overwhelming concerns about issues related to the environment, specifically with issues related to how business intersects with environmental conservation. Consumers are becoming more and more prone to purchase products that consider the environment and sustainability, and they are more willing to pay the premium price tag that comes along with supporting those sustainability efforts. This growing concern has inspired manufacturing firms to develop more effective environmental management practices as they innovate newer and better products.

New research led by PhD student Muaz Mahmud published in collaboration with the House of Innovation, reveals insights about the effects that environmental management practices are having on product innovation within small manufacturing firms. This study examines two types of product innovation activities specifically: product exploration and product exploitation. Product exploration refers to the introduction of new products to meet demand. In contrast, product exploitation refers to the innovation of pre-existing products to meet demand.

Conducting environmental management and innovation involves uncertainty. As such, competitive advantage can be treated as a moderator for ensuring that these endeavours yield positive impacts. This study is based on a survey conducted among 106 managerial-level employees for small manufacturing firms in the UK. The findings support the role of environmental management on product exploration. They also support the influence of environmental management on product exploitation. Overall, the findings support the argument that firm’s environmental culture and practice are the main elements of green innovation.

Critical shift

This research is important because business has been seeing a critical shift in that sustainability and environmental management are now top priority on many firms’ agenda with the intention of ensuring a cleaner production process. This study provides insights on the practice of environmental management in the context of small manufacturing firms. It also examines the impact of environmental management on innovation activities. Lastly, it provides insights for small firm managers about environmental management practice, and it advances theoretical linkages between environmental management and innovation management.

Future research could be extended to medium or large firms and examine the practice of environmental management in specific sectors such as metal, chemical, food, etc. Further, these studies should increase the size of the sample to potentially achieve a lower threshold for statistical significance.


Muaz Mahmud
Lancaster University Management School

Danny Soetanto
Lancaster University Management School

Sarah Jack
House of Innovation, Stockholm School of Economics

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