Dynamic capability matters: Uncovering its fundamental role in decision making of environmental innovation

This study aims to explore organizations' intrinsic drivers of voluntarily adopting environmental innovations that are in early stage of diffusion. In particular, it investigates the vital role of dynamic capabilities in the decision-making process of adoption. Adopting a process-oriented model, this study focuses on the initiation (instead of implementation) process of innovation adoption and examines how dynamic capabilities can result in intention of adopting environmental innovation voluntarily. The findings show that dynamic capabilities have positive effects on organizational intention of adoption not only directly, but also indirectly through facilitating managers to interpret environmental innovations as an opportunity, rather than a threat. Furthermore, this partial mediating role of managerial interpretation between dynamic capabilities and environmental innovation adoption varies depending on organizational social position. Compared to central firms, peripheral firms tend to be more responsive to managerial interpretation. The chain from dynamic capabilities, to interpretation of environmental innovation as an opportunity, and finally to the intention of adoption is stronger for peripheral firms than for central ones.