Does innovation success need advocacy? Stakeholder involvement in firm innovation

Abstract

Prior research documents that firms often collaborate with advocacy groups to mitigate stakeholder contention. Integrating stakeholder theory into a performance model of collaborative innovation, we propose an overlooked explanation for such collaborations: to enhance the adoption of firms' innovations. We argue that advocacy groups influence the adoption of innovations through a distinct, role-based legitimacy mechanism. Because advocacy groups are expected to scrutinize firms' conduct, their willingness to collaborate provides a credible signal that a firm's innovation is socially appropriate. These signals become particularly valuable when firms have previously faced media criticism for socially irresponsible products or services and in industries characterized by high variation in corporate social performance. Using a unique dataset on firms' innovation collaborations in Germany, we find support for our conjectures. Research indicates that firms collaborate with advocacy groups to avoid boycotts or protests. We introduce a largely overlooked additional rationale for such collaborations: to enhance the adoption of a firm's innovations. We suggest that advocacy groups can lend legitimacy to innovations and argue that firms benefit most from such collaborations when their products and services received bad press in the past and when there is considerable variation in corporate social performance across firms in the industry. Based on unique data on innovation collaborations between firms and advocacy groups, we find that these conditions matter in determining when firms can significantly benefit from involving advocacy groups in their innovation projects.