Abstract

While stakeholder engagement is central to the sustainability development literature, research has mostly focused on stakeholder pressures or interests. However, recent literature has started exploring stakeholders’ roles as being more collaborative and the impact of their collaboration with firms. Sustainability-oriented innovation necessitates actors with knowledge that exceeds the capabilities of one organization, meaning that sustainability-oriented products and services cannot be created by one organization alone, but require collaboration with its stakeholders. While stakeholder theory aims to create value for all stakeholders, sustainability management believes that creating sustainable value on the economic, environmental, and social levels has to be interlinked with the core business. This article explores the role and impact of the collaboration between small and medium enterprises (SMEs) and their stakeholders within the Sustainability-Oriented Innovation (SOI) process. Our findings show that SMEs and their stakeholders, driven by a shared purpose, form and align with networks to inform, educate, and spread awareness about sustainability. This collaboration impacts the industry by changing core operations of business practices and changes the markets perception of the organization, in addition to having an impact on individual stakeholders’ sense of identity, resulting in the development of stronger relationships with SMEs. This study contributes to the literature of SOI by providing empirical evidence to support the “sustainability-rooted” strategic sustainability behavior and the “systems building.”