Developing an eco-capability through environmental orientation and organizational innovativeness

Green marketing has become increasingly prevalent, however, generating profits through green marketing has not. Although firms continue to adopt environmental strategies, they struggle to gain a competitive advantage. This study sheds light onto this discrepancy by introducing the concept of an eco-capability, as well as two antecedents instrumental to its formation (i.e., environmental orientation and organizational innovation). Applying the resource-based view of the firm and dynamic capabilities literature, we investigate this eco-capability which fully leverages a firm's human, business, and technology resources. Using survey data from marketing managers across fourteen industries, we estimate a Latent Moderated Structural model that provides support for these three resource components. Environmental orientation and organizational innovativeness are found to be predictors of this eco-capability. Their interaction is also significant, which suggests that a firm that it is both environmentally oriented and innovative is most likely to develop an eco-capability. Finally, we demonstrate that an eco-capability is positively related to two strategic outcomes — market and financial performance, as well as the perceived quality of the firm's offering. •We develop an empirically test a new environmental construct called an eco-capability.•We define the human, business, & technology resources that comprise an eco-capability.•Environmental orientation and organizational innovativeness predict this eco-capability.•An eco-capability increases the perceived quality of a firm's product or service offering.•An eco-capability is positively related to a firm's market and financial performance.