Theoretical perspectives on innovation 65
The literature on private forms of governance within firms and along value
chains offers insights into the dynamics of firms and industries that can
augment second- and third- generation perspectives on innovation.
Along value chains, global value chain (GVC) scholars highlight how firms
acquire capabilities and access new market segments (“upgrade”) through
participation in specific value chains, where learning from downstream firms
is seen as a central upgrading mechanism (Bolwig, Ponte, du Toit, Riisgaard
& Halberg, 2010; Gereffi & Lee, 2016). Value chain governance is the process
by which so- called “lead firms” organise activities with the purpose of achieving a certain functional division of labour within a chain. It involves setting
the terms of chain membership, such as prices or the compliance with technical, environmental and legal standards. It also includes the way in which such
market requirements are implemented along the chain, and how they affect
chain participation for firms, the re- allocation of value- adding activities and
the distribution of costs and benefits (Gibbon, Bair & Ponte, 2008). In the
context of waste valorisation, the GVC perspective and the governance
mechanisms just mentioned suggest that the capabilities and incentives of
innovation are strongly influenced by the nature of the inter- firm linkages
and power relationships in specific markets. Yet, similarly to the trend within
innovation studies, recent GVC literature highlights that a broader range of
actors, such as governments, standard- setters and NGOs, can yield significant
influence on value chain governance, especially in emerging industries such as
renewable energy (Nygaard & Bolwig, 2018; Ponte & Sturgeon, 2013).
At the firm level, scholars have long studied the links between private
sustainability measures or corporate social responsibility (CSR) on the one
hand and the competitive advantage to companies on the other. See Chapter
6 on brewing. In the brewing industry, CSR efforts include the sustainable
use of organic residues, reduced water consumption, waste water management, more efficient energy use and diminished CO 2 emissions, sustainable
packaging and responsible drinking. To pursue a competitive advantage,
companies must choose between product differentiation and low costs in
terms of cost leadership (Porter, 1985). CSR serves as a means of product
differentiation by functioning as a co- specialised asset that makes other assets
more valuable (McWilliams & Siegel, 2011). Most evident here is the effect
of CSR on reputation or branding (Roberts & Dowling, 2002). Branding and
reputation are hard- to-get resources that cannot be imitated and thus serve as
entry barriers to competitors (Reinhardt, 1998). Hence CSR can serve as a
means for obtaining a sustainable competitive advantage (McWilliams &
Siegel, 2011). In this context, a review of 200 studies by Clark et al. (2015)
found a positive association between companies’ sustainability measures and
their economic performance in terms of the cost of capital, operational performance and stock price, although the direction of causality is ambiguous.
Despite such benefits, Whelan and Fink (2016) observe that sustainability and
broader CSR measures are only rarely placed at the core of a business’s
strategies.
The literature on private forms of governance within firms and along value
chains offers insights into the dynamics of firms and industries that can
augment second- and third- generation perspectives on innovation.
Along value chains, global value chain (GVC) scholars highlight how firms
acquire capabilities and access new market segments (“upgrade”) through
participation in specific value chains, where learning from downstream firms
is seen as a central upgrading mechanism (Bolwig, Ponte, du Toit, Riisgaard
& Halberg, 2010; Gereffi & Lee, 2016). Value chain governance is the process
by which so- called “lead firms” organise activities with the purpose of achieving a certain functional division of labour within a chain. It involves setting
the terms of chain membership, such as prices or the compliance with technical, environmental and legal standards. It also includes the way in which such
market requirements are implemented along the chain, and how they affect
chain participation for firms, the re- allocation of value- adding activities and
the distribution of costs and benefits (Gibbon, Bair & Ponte, 2008). In the
context of waste valorisation, the GVC perspective and the governance
mechanisms just mentioned suggest that the capabilities and incentives of
innovation are strongly influenced by the nature of the inter- firm linkages
and power relationships in specific markets. Yet, similarly to the trend within
innovation studies, recent GVC literature highlights that a broader range of
actors, such as governments, standard- setters and NGOs, can yield significant
influence on value chain governance, especially in emerging industries such as
renewable energy (Nygaard & Bolwig, 2018; Ponte & Sturgeon, 2013).
At the firm level, scholars have long studied the links between private
sustainability measures or corporate social responsibility (CSR) on the one
hand and the competitive advantage to companies on the other. See Chapter
6 on brewing. In the brewing industry, CSR efforts include the sustainable
use of organic residues, reduced water consumption, waste water management, more efficient energy use and diminished CO 2 emissions, sustainable
packaging and responsible drinking. To pursue a competitive advantage,
companies must choose between product differentiation and low costs in
terms of cost leadership (Porter, 1985). CSR serves as a means of product
differentiation by functioning as a co- specialised asset that makes other assets
more valuable (McWilliams & Siegel, 2011). Most evident here is the effect
of CSR on reputation or branding (Roberts & Dowling, 2002). Branding and
reputation are hard- to-get resources that cannot be imitated and thus serve as
entry barriers to competitors (Reinhardt, 1998). Hence CSR can serve as a
means for obtaining a sustainable competitive advantage (McWilliams &
Siegel, 2011). In this context, a review of 200 studies by Clark et al. (2015)
found a positive association between companies’ sustainability measures and
their economic performance in terms of the cost of capital, operational performance and stock price, although the direction of causality is ambiguous.
Despite such benefits, Whelan and Fink (2016) observe that sustainability and
broader CSR measures are only rarely placed at the core of a business’s
strategies.