How Environmental Innovations Emerge and Proliferate in Supply Networks: A Complex Adaptive Systems Perspective

• Author: Anand Nair,Su‐Yol Lee,Todd H. Chiles,Tingting Yan,Young K. Ro,Adegoke Oke
• Date: 01 April 2016
• Published date: 01 April 2016
• DOI: http://doi.org/10.1111/jscm.12102

HOW ENVIRONMENTAL INNOVATIONS EMERGE AND

PROLIFERATE IN SUPPLY NETWORKS: A COMPLEX

ADAPTIVE SYSTEMS PERSPECTIVE

ANAND NAIR

Michigan State University

TINGTING YAN

Wayne State University

YOUNG K. RO

University of Michigan –Dearborn

ADEGOKE OKE

Arizona State University

TODD H. CHILES

University of Missouri

SU-YOL LEE

Chonnam National University

Through a qualitative study of two firms’supply networks, we develop a

theory of the process by which environmental innovations emerge and

proliferate in supply networks. To overcome limitations of current supply

network innovation theories, which focus on the diffusion of existing

innovations, we employ a complex adaptive systems perspective, which

addresses how such innovations come into being in the first place and

how they spread in a network over time. Our findings suggest a process

model, in which temporally connected processes cross from the organiza-

tional to the network level, creating and spreading environmental innova-

tions in supply networks. This model and its corresponding theoretical

propositions were generated through an abductive research methodology.

Our key insight is that development of environmental innovations in sup-

ply networks is an emergent phenomenon. Once in the network realm,

the process ceases to be under the control of the dominant buying firm.

Instead, self-organization and decentralized coordination prevail.

Keywords: environmental innovation; supply networks; complex adaptive systems;

emergence; case study; process research; theory development

INTRODUCTION

Sustainability has become increasingly important as

firms and organizations tackle environmental chal-

lenges ranging from water pollution to landfill waste

to climate change. To meet their sustainability goals

and satisfy external stakeholders, many firms have

Acknowledgment: The authors gratefully acknowledge the com-

ments of editor-in-chief Craig Carter, special topic forum guest

editors Daniel Krause and Gideon Markman, three anonymous

reviewers, and participants in the 3rd Biennial Meeting of the

Center for Supply Networks at Arizona State University.

Volume 52, Number 266

introduced “green” or “eco”-innovations (Kemp &

Arundel, 1998; Rennings, 2000): new or modified

products, processes, and practices that reduce or com-

pletely avoid harm to the natural environment. Such

environmental innovations increasingly require the

efforts of interconnected networks of dominant

buying firms and their suppliers (Lee & Klassen, 2008;

Tachizawa & Wong, 2015). The complexity of these

connections raises an important question for green

supply chain management (GSCM) scholars and prac-

titioners: How do environmental innovations emerge and

proliferate in supply networks?

Some GSCM scholars (e.g., Sarkis, Zhu & Lai, 2011)

have turned to diffusion of innovation (DOI) theory

(Rogers, 1983) to describe green innovation in supply

networks. The features of emergent environmental

innovations, however, do not always match the DOI

model. For example, DOI theory assumes that net-

work members have full control of diffusion through

sound decision making (Rogers, 1983), but in prac-

tice, an individual buyer or supplier may exert only

partial control over the process. More fundamentally,

DOI theory focuses on how existing innovations

spread, and thus is silent on how such innovations

come into being in the first place. Accordingly, DOI

theory is not well suited to address how environmen-

tal innovations both emerge and proliferate in a sup-

ply network. To address these shortcomings, an

alternative theoretical perspective is needed.

We propose a complex adaptive systems (CAS)

perspective (Choi, Dooley & Rungtusanatham, 2001;

Pathak, Day, Nair, Sawaya & Kristal, 2007), which

complements the dominant DOI perspective, yet

goes beyond it in three important ways: (1) It spot-

lights an interconnected network of heterogeneous

agents adapting to changes in their environment;

(2) it acknowledges the possibility of nonlinear rela-

tionships in which changes in one part of the net-

work can affect noncontiguous parts or the entire

network; and (3) it emphasizes the interaction of

agents following relatively simple rules, which gives

rise to new network structures, patterns, and proper-

ties. This self-organizing behavior (whereby innova-

tions at higher levels are not imposed by a central

controller, but rather emerge as individuals act and

interact at lower levels in a complex system) is use-

ful for understanding how environmental innova-

tions are created and spread in supply networks.

As GSCM researchers extend their inquiry from first-

tier suppliers to those further upstream, the CAS per-

spective provides a more accurate representation of

the structural complexity of buyer–supplier relations

and the processes by which network members, rela-

tionships, and innovations evolve over time (Choi

et al., 2001; Pathak et al., 2007). In contrast to previ-

ous research focusing on dominant buying firms’ con-

trol-oriented behaviors, such as monitoring suppliers’

activities (Lee & Klassen, 2008), our study examines

how eco-innovations both emerge and proliferate in

self-organizing supply networks.

Our key insight is that development of environmen-

tal innovations in supply networks is an emergent

phenomenon. Innovations that originate in the domi-

nant buying firm continue to develop beyond that

firm’s boundaries; and, through a series of organiza-

tional- and network-level processes, their development

spreads throughout the supply network. Importantly,

once in the network realm, these processes are not

under the control of the dominant buying firm.

Instead, self-organization and decentralized coordina-

tion prevail.

BACKGROUND AND THEORETICAL

POSITIONING

Environmental Innovations—From a Single Firm

to an Evolving Supply Network

To respond effectively to increasing pressure from

stakeholders (Aragόn-Correa & Sharma, 2003), orga-

nizations must develop sustainability in both their

internal operational and external supply manage-

ment practices (Krause, Vachon & Klassen, 2009;

Pagell, Wu & Wasserman, 2010; Rauer & Kaufmann,

2015). As Pagell and Shevchenko (2014) observe,

the sustainability literature focuses too much on

familiar business practices, such as lean production

techniques, at the expense of environmental innova-

tions. Studies that do address such innovations

focus on the roles of focal firms and suppliers,

without enough attention to the influence of net-

work-level processes. Although individual firms can

do much to effect change, the increasing intercon-

nection of businesses renders their isolated efforts

less than fully effective and underlines the urgent

need to tackle such network-level processes.

The GSCM literature is expanding its focus to

include second-, third-, and higher-tier suppliers (Lee

& Klassen, 2008). Tachizawa and Wong (2015), for

example, recently argued that a supply network’s com-

plexity—a multidimensional construct that includes

the number of tiers in a supply network—has an

important influence (along with other factors) on its

GSCM effectiveness. This broadened focus has

revealed that dominant buying firms’ lack of direct

control over their subsuppliers in the extended supply

network limits their ability to monitor and support

their suppliers, presenting unique challenges for build-

ing green innovations (Pagell & Wu, 2009; Paulraj,

2011). Tate, Ellram and G€

olgeci (2013) shed valuable

light on how embeddedness affects the diffusion of

environmental business practices (EBPs) in such net-

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Environmental Innovations in Supply Networks

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