Green exploration and exploitation: Capabilities, product advantage, and policy considerations

While sustainability has been identified as a critical driver of innovation, our understanding of green innovation activities interrelationship with capability antecedents and consequences of both green exploration and green exploitation remains unclear. A preliminary framework is developed to guide hypotheses and provide insights into green innovation and its connections with new product advantage from a Resource-Advantage (R-A) perspective. A sample of 197 traditional Chinese manufacturing enterprises conducting green innovation is an input into a structural equation model. The results indicate that green exploitation has direct positive effects on both innovative eco-friendly products' customer satisfaction and differentiation, whereas green exploration only positively impacts product differentiation. Importantly, green exploitation fully mediates the connections between capability antecedents (i.e., technology capability and market capability) and new product advantage (i.e., customer satisfaction and differentiation). By contrast, green exploration only fully mediates capability antecedents on new product differentiation. Our findings shed new light on exploration and exploitation research that shapes green innovation activities. Further, it contributes greater clarity into how manufacturing enterprises translate their technology and market capabilities into new eco-friendly product advantage. Moreover, the results suggest implications for manufacturers to become both “green and competitive” as well as offer policy-makers insights into shaping programs to assist green innovation.