Running head: MICROFOUNDATIONS OF SUSTAINABILITY CAPABILITIES 1 Fifty Shades of Green: How Microfoundations of Sustainability Vary Across Contexts

Since making progress on sustainability related challenges will require organizational change for most organizations, understanding sustainability dynamic capabilities is of utmost importance. In this theoretical paper, we aim to identify the microfoundations of such sustainability dynamic capabilities on the one hand but, consistent with recent work in this research stream, we do so in a way that is sensitive to the dynamism of the organizational environment. We propose that the microfoundations of sustainability dynamic capabilities will take different forms in different contexts. We contrast moderately dynamic contexts characterized by frequent yet relatively predictable change with highly dynamic contexts in which changes are rapid and not predictable. Achieving sustainability in these different types of contexts poses different types of challenges, relies on different forms of employee behaviors, and is consequently enabled by different individual-level characteristics and different organizational practices and processes. Our paper calls for a more serious consideration of context in investigating how employees’ behaviors can affect sustainability at the organizational level, and outlines the implications for organizational policy and practice. We explore directions for future interdisciplinary research on sustainability that focuses on individuals and their interactions while also taking the environment within which organizations operate into account. MICROFOUNDATIONS OF SUSTAINABILITY DYNAMIC CAPABILITIES 3 Fifty Shades of Green: How Microfoundations of Sustainability Dynamic Capabilities Vary Across Organizational Contexts Organizations pursuing a sustainable development strategy do “not merely seek to do less environmental damage but, rather, to actually produce in a way that can be maintained indefinitely into the future” (Hart & Dowell, 2011, p. 1466). To understand how sustainability, as a collective phenomenon at the organizational level, can be achieved, we “need to understand the constituent parts that make it up: individuals and their social interaction” (Barney & Felin, 2013, p. 139) – in other words, its microfoundations. To date, a substantial body of research on sustainability has employed an organizationallevel approach, focusing on, for example, how sustainability at the level of the organization is related to financial performance (Albertini, 2013; Etzion, 2007). On the other hand, there has been a surge in organizational behavior and organizational psychology research on individuallevel employee behaviors that are presumed to contribute to sustainability, such as proenvironmental or “green” behaviors (see Lo, Peters, & Kok, 2012; Lülfs & Hahn, 2014; Norton, Parker, Zacher, & Ashkanasy, 2015; Young et al., 2015, for reviews). This growing literature has provided useful insights into how these behaviors are motivated (e.g., Graves, Sarkis, & Zhu, 2013), how organizations can promote them through their practices (e.g., Norton, Zacher, & Ashkanasy, 2014; Paillé, Chen, Boiral, & Jin, 2014) or through targeted interventions (e.g., Unsworth, Dmitrieva, & Adriasola, 2013), and how leaders can support them (e.g., Kim, Kim, Han, Jackson, & Ployhart, in press; Robertson & Barling, 2013). However, there has been little research bridging organizationaland individual-level approaches to sustainability. Although sustainability is assumed “to result to a large extent from the aggregation of a multitude of green behaviors in the workplace” (Boiral, Paillé, & Raineri, 2015, p. 12), we know little about how these employee behaviors can enable organizations to MICROFOUNDATIONS OF SUSTAINABILITY DYNAMIC CAPABILITIES 4 become more capable of dealing with the challenges of sustainability. Yet the value of individuallevel theories of employee “green” or pro-environmental behavior ultimately lies in their link to sustainability at the firm level (cf. Devinney, 2013). In this paper we aim to bridge this macromicro divide in sustainability research by providing a framework that outlines how the microfoundations of sustainability dynamic capabilities across different contexts. We contribute to the literature in the following ways: First, we develop the concept of sustainability dynamic capabilities. Organizations engaging in “proactive environmental” or sustainability strategies are confronted with specific challenges, because incorporating sustainability as a business concern requires the balancing and alignment of business objectives with environmental outcomes. As a specific subset of dynamic capabilities, we therefore propose sustainability dynamic capabilities as those capabilities that enable an organization to reconfigure its resource base, to deal with the dynamism resulting from such “proactive environmental” or sustainability strategies. Second, we take a microfoundational approach to sustainability dynamic capabilities which considers the individual-level components of these organizational-level capabilities (Felin, Foss, Heimeriks, & Madsen, 2012). We specifically focus on employee behaviors as key microfoundations. Focusing on employee behaviors – which have been the focal point of much organizational behavior and organizational psychology research on “greening organizations” (Boiral et al., 2015; Norton et al., 2015; Ones & Dilchert, 2012) – allows us to integrate this body of research with the strategic management literature on sustainability. By integrating strategic management theory with organizational psychology research on pro-environmental behavior we aim to contribute to both bodies of literature and provide directions for future interdisciplinary research on sustainability, proposing bridges between the macro-micro divide that focus on individuals and the interactions between them, while also MICROFOUNDATIONS OF SUSTAINABILITY DYNAMIC CAPABILITIES 5 taking into account the context within which organizations operate. Doing so is important, as we have learned that, in moving towards more sustainable organizations, details matter too much to be overlooked. If we want to bridge the gap between good intentions and actual behaviors, we must be sensitive to the details that may hamper our intentions to turn into environmental progress (Blok, Gremmen, & Wesselink, 2015; Derksen & Gartrell, 1993; Ertz, Karakas, & Sarigöllü, 2016). Importantly, we propose that we are likely to get to a better understanding of how organizational sustainability can be realized only if we take a more contextualized perspective on the microfoundations of sustainability dynamic capabilities. Extant literature suggests that the efficacy of organization level capabilities depends on the context in which they need to operate. In contemplating the micro-level drivers and facilitators of organizational sustainability, we must be careful not to consider them as generic to all different contexts: “We strongly advise avoiding the temptation to apply general prescriptions to the analysis of environmental strategies, and recommend using a contingent lens instead. Improving corporate environmental performance is urgent for a sustainable world, but environmental management demands a specific analysis of each firm and its business and general context” (Aragón-Correa & Rubio-López, 2007, p. 375). Although organizational contexts can vary on many dimensions (Dess & Beard, 1984; Milliken, 1987), our focus in this paper is the unpredictability of the context in which a firm is operating. Drawing on Eisenhardt and Martin’s (2000) conceptualization of dynamic capabilities we argue that the microfoundations of sustainability vary depending on the dynamism of the situation in which an organization finds itself which results, at least in part, from an organization’s sustainability strategy. In moderately dynamic contexts, different capabilities are MICROFOUNDATIONS OF SUSTAINABILITY DYNAMIC CAPABILITIES 6 likely to be required to achieve sustainability than in highly dynamic contexts (Eisenhardt, 1989). Consequently, the microfoundations for sustainability are also likely to vary. In organizational psychology and organizational behavior research, however, individual “green” behaviors and factors at the organizational level (e.g. pro-environmental leadership) are generally considered to contribute to sustainability irrespective of the context within which the organization operates. By outlining how the microfoundations of sustainability dynamic capabilities vary depending on the dynamism of the organization’s context, we provide a framework that allows for a more nuanced (and hopefully more practical) perspective. We highlight that factors which constitute microfoundations of sustainability in some contexts paradoxically fail to support sustainability in others. Our model also brings microfoundations of sustainability dynamic capabilities into focus which have not yet been investigated. We back up our theoretical arguments through recourse to a range of practical examples from a wide range of industries. Organizational capabilities for sustainability Research on sustainability has shown that going beyond simply complying with environmental regulations is difficult, and requires a specific set of capabilities (Aragon-Correa and Sharma, 2003) to deal with the changes and complexities involved. The concept of capabilities is rooted in the resource-based theory of the firm (Barney, 1991; Wernerfelt, 1984). In this perspective, organizational performance is the result of an organization’s resources, defined broadly as “anything which could be thought of as a strength or weakness of a given firm” (Wernerfelt, 1984, p. 172), or the organization’s tangible and intangible assets. While it initially started as theoretical project to refocus the emphasis of strategy scholarship away from an exclusive interest in the external environment and towards explaining superior organizational MICROFOUNDATIONS OF SUSTAINABILITY DYNAMIC CAPABILITIES 7 performance as