The role of responsible innovation and entrepreneurship in achieving sustainable development

  • Climate and sustainability

Yipeng Liu FAcSS, Professor in Management and Organisation Studies and Founding Director of the Research Centre for China Management and Global Business, University of Reading 

In this piece Yipeng Liu demonstrates how responsible innovation and entrepreneurship, working within an appropriate and conducive industrial framework, can help us tackle global challenges including the climate crisis.

The Green agenda, climate change, and innovative solutions to achieving net zero emission is one of the biggest challenges facing humanity today and in the foreseeable future. Governments in both advanced economies and developing ones have not only expressed strong willingness to contribute to this important agenda, but also began aptly championing ideas, re-orienting innovation and industrial policy, orchestrating resources, and cultivating new industry sectors with sought-after skills, competences and capabilities. I argue that three key factors can play a crucial role for effectively achieving the Green agenda around the world, namely: (1) the value of responsible innovation, (2) the central role of entrepreneurship and disruptive technologies, and (3) the importance of appropriate institutional framework conditions.

First, responsible innovation may radically transform research and practice on innovation activities, processes and outcomes. In 2014, the European Commission introduced the Research and Responsible Innovation (RRI) framework  with the aim of anticipating and assessing the “potential implications and societal expectations with regard to research and innovation, with the aim to foster the design of inclusive and sustainable research and innovation”. It has been widely acknowledged that climate change is close to its historical turning point. Individuals, organisations, and societies across both developed and emerging economies must take serious action and engage in collaborative efforts to deal with climate change. Failing to do so would leave humanity facing a life-threatening crisis with devastating consequences. The COP26 climate conference, held in Glasgow in November 2021, highlighted the urgency of the Green agenda and climate change challenges, which drew significant attention and debates from world leaders, policymakers, the business community, and global entrepreneurs.

I argue that responsible innovation has a great deal of potential to offer in addressing climate change challenges while contributing to the Green agenda. Responsible innovation should not be limited to ethical considerations, such as social responsibility and the accountability associated with innovation activities, but rather embrace a more inclusive, holistic, and diversity perspective. For instance, one recent study explored the innovation performance implications of responsible innovation in the circular economy as an innovative pathway to tackle climate change challenges. Notably, this study posits that responsible innovation firms can be conceptualised as hybrid organisations capable of coping with the multiple—and often competing—demands of their commercial and societal missions. Essentially, responsible innovation firms engage in business activities with societal values and purposes. The tension stemming from the profit- and societal-value-driven goals embedded in hybrid organisations can play a substantial role in shaping responsible innovation firms’ strategies and performance outcomes, such as healthcare organisations. In brief, achieving and leveraging responsible innovation necessitates multidisciplinary and interdisciplinary perspectives involving multi-level and system approaches to tackling pressing societal grand challenges, such as climate change, healthcare, and poverty, among others.

Second, entrepreneurship is crucial for developing innovative solutions and leveraging disruptive technologies for the Green agenda. Grand challenges, by definition, lack clear solutions, and the expected outcomes are of a disruptive nature, bearing with the potential to change and transform the ways we produce, consume, interact, and live. In addition, due to technological complexity, grand challenge-based technologies require knowledge drawn from multidisciplinary and interdisciplinary perspectives. In other words, grand challenges, such as climate change, necessitate pragmatic approaches and imaginative orientations in seeking creative solutions with entrepreneurial spirit and responsible innovation attitude. Entrepreneurship should and can play an important role in facilitating the development and implementation of ideas and novel solutions stemming from disruptive technologies for the Green agenda. For example, entrepreneurs’ ability to assess and deal with risk can be crucial for the discovery and development of disruptive technologies as they oftentimes encounter surprises, setbacks and challenges.

The emergence and utilisation of disruptive (digital) technologies, such as big data, AI, and blockchain, may revolutionise the pathways towards Green agenda in the context of circular economy. Especially, the manufacturing companies may leverage digitalisation and servitization to better engage with the circular economy strategy. Go beyond and complement with the ‘no innovation without entrepreneurship’ statement, I argue that the value of responsible innovation may be better captured in conjunction with entrepreneurship and entrepreneurial behaviours in exploring and exploiting opportunities in order to tackle the grand challenges associated with the Green agenda across the globe. Essentially, innovation and entrepreneurship are the core ingredients for any type of organisations and our society at large in today’s volatile, uncertain, complex and ambiguous (VUCA) world striving for the Green agenda, a net zero economy, and long-term resilient and sustainable development.

Finally, it is critical to possess the appropriate institutional framework conditions for responsible innovation to flourish in the circular economy. From the perspective of innovation activities, institutional environment contains the national innovation system and regional innovation system. The institutional differences among different regions can have a strong bearing on the innovation performance of responsible innovation firms in the circular economy. Due to the disruptive nature and technological complexity, responsible innovation firms may face higher levels of problem-solving difficulties. This necessitates the institutional framework conditions that favour exploring uncertainty and uncharted territories with the appetite for risk-taking behaviours.

Notably, there exists the institutional rigidity effect influencing responsible innovation in circular economy. Institutional rigidity can be defined as status quo criteria, namely a set of common objectives, steps-to-follow, and rules for private and public organisations seeking to work on a project. Thus, institutional rigidity can be understood as institutional conformity in the context of innovation policy for firms seeking to obtain public funding for science and technology projects. Strikingly, our research found that, paradoxically, the greater likelihood that responsible innovation projects will be funded by public institutions diminishes rather than enhances the innovation capacity of responsible innovation firms. The strong influence wielded by the rigid criteria and evaluation metrics imposed by public institutions limits the independence of the research decisions made by responsible innovation firms. In the climate change context, responsible innovation firms report a lower patent productivity than strictly for-profit counterparts. Importantly, contextual conditions can reduce the patent disadvantage of responsible innovation firms as hybrid organisations. Responsible innovation firms perform better in developed nations with high levels of national R&D investment.

This highlights the important role played by the institutional framework conditions that may enable or constrain the processes and outcomes of responsible innovation. Countries should recognise the comparative advantages associated with their institutional framework conditions in tackling grand challenges for sustainable development. For example, the UK, with its strong market logic orientation, was able to act speedily in the vaccine purchasing (pre-order) endeavours of the UK government, which, from the very beginning, hired a venture capital veteran (Kate Bingham) to help tackling the COVID-19 global healthcare crisis. Furthermore, Germany, with its strong manufacturing base and industrial foundation, engages with Knowledge Intensive Business Services (KIBS) firms to innovate and transform its industry in the circular economy. This indicates the necessity in paying attention to explore institutional and industrial-level factors that can affect novel solutions in addressing grand challenges from a multi-level perspective. Thus, policymakers should be aware of why and how institutional framework conditions matter and how to provide the supportive and favourable environment for responsible innovation to address grand challenges, including climate change.

To summarise, the lessons and empirical evidence gathered in Europe and the UK regarding responsible innovation and grand challenges may shed some revealing light on the development of the Green agenda and net zero economy around the world. The three key ingredients to foster innovative ideas for the circular economy and actionable solutions for sustainable development are: (1) responsible innovation, (2) entrepreneurship and disruptive technologies, and (3) appropriate institutional framework conditions.

Photo Credit: Ameen Fahmy on Unsplash

About the author

Yipeng Liu FAcSS is Founding Dean of Yellow River College of Business in China, and Professor in Management and Organisation Studies and Founding Director of the Research Centre for China Management and Global Business at Henley Business School, University of Reading, UK. He is a Fellow of the Academy of Social Sciences. His research interests centre on entrepreneurship and innovation, global talent management, business sustainability, and emerging markets. His recent books are Research Handbook of International Talent Management (2019), and Innovation in Global Entrepreneurship Education (with Heidi Neck, 2021).