At a macro level, innovation for society refers to innovation of societal institutions. At a micro level, it refers to innovations undertaken by social entrepreneurs as start-ups with a social and/or environmental mission and innovations undertaken by firms in products/services, processes, operations, technologies, and business models to address social and environmental challenges while achieving core economic objectives. The focus here is on firm-level innovations and the drivers for such innovations.
Exogenous drivers include institutional-level influences such as regulations, societal norms, and industry best practices (mimetic forces) and stakeholder-level influences including shareholders, investors, customers, regulators, nongovernmental organizations, media, and others that have power, legitimacy, and urgency of their claims directly or indirectly via other stakeholders. The endogenous drivers include institutional ownership, activist shareholders, boards of directors, ownership, and competitive strategy focused on developing profitable businesses that address societal challenges.
Even when the firm is motivated due to exogenous and endogenous drivers to undertake investments in innovating for society, it needs the capacity to generate and implement such innovations. Innovations for society require motivated managers, managerial capacity, and organizational capabilities that go beyond routine innovations that firms undertake to improve products and processes and enter new markets. This capacity enables firms to reconcile their performance on economic, social, and environmental metrics to address societal challenges while achieving core economic objectives.
Managerial capacity requires firms to overcome cognitive biases and create opportunity frames that convert negative loss bias, where managers perceive lack of control over outcomes, to a positive opportunity bias, where managers perceive the ability to control their decisions and actions. Opportunity framing involves legitimization of innovation for society in the corporate identity, integration of sustainability metrics into performance evaluation, creation of discretionary slack, and empowerment of managers with a relevant and ongoing information flow.
Innovating for society also requires major changes in a firm’s decision-making processes and investments in new organizational capabilities of engaging stakeholders and integration of external learning, processes of continuous improvement of operations, higher order or double-loop organizational learning by integrating external learning with internal knowledge, cross-functional integration, technology portfolios, and strategic proactivity, all leading to processes of continuous innovation.
Knowledge about the role of firms in addressing societal challenges has grown over the past three decades as scholars in multiple disciplines have explained the motivations of firms to undertake innovations for society, processes to build organizational capabilities to adopt and implement sustainability strategies, and linkages of such strategies to financial performance. Nevertheless, such innovations and strategies are far from a universal norm.