Doing well by doing good: A study of university-industry interactions, innovationess and firm performance in sustainability-oriented Australian SMEs

Increased concerns about excessive resource consumption, environmental degradation and social inequity have led to calls for a transition toward a more sustainable economy and society. Against this background, the role of innovation in helping enterprises become more sustainable has received increasing attention in the academic literature. While cooperation with external actors is assumed to increase enterprises' capacity for sustainability-oriented innovation (SOI) there is a dearth of empirical studies to support this notion, particularly with regard to university-firm interactions. This is surprising, given the so-called “third mission” activities. The purpose of this study is to address this gap by examining the role and effect of university-firm interactions on innovation outcomes, and firm performance in SOI in small and medium-sized enterprises (SMEs). Using structural equation modelling to analyse a sample of 153 SMEs, we find that generic links in the form of human resource transfer have a significant positive effect on innovativeness, and innovativeness, in turn, is positively related to firm performance. Furthermore, human resource transfer affects firm performance through innovativeness. Therefore, this study supports the premise that developing human resource transfer via employing new graduates, providing graduates with further education and providing employees with vocational training generates performance benefits in the form of innovation outcomes, which in turn indirectly leads to productivity and sales growth in SOI in Australian SMEs. This research contributes to an improved understanding of the relationships between university-firm interactions, the innovation output, and firm performance in the context of SOI in SMEs adding to the emerging dialogue on the “third mission” activities of universities, and the business case for sustainability.