# The role of dynamic capabilities in the development of eco-innovations

Nicolas Befort, Martina Ayoub, Mireille Matt

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Nicolas Befort, Martina Ayoub, Mireille Matt. The role of dynamic capabilities in the development of eco-innovations. Current opinion in green and sustainable chemistry, 2025, 53, pp.101031. 10.1016/j.cogsc.2025.101031. hal-05169007

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# The role of dynamic capabilities in the development of eco-innovations

Nicolas Befort¹, Martina Ayoub² and Mireille Matt³

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As industries transition toward sustainability to meet climate change targets, they face the challenge of moving beyond the fossil economy. This article explores the role of dynamic capabilities in fostering eco-innovations, which are critical for firms aiming to navigate and thrive in the postfossil era. Through the orchestration of internal and external resources, firms can create long-term competitive advantages that align with eco-innovation objectives. Using a resource-based perspective, this study analyzes how firms integrate natural resources into their dynamic capability framework, ensuring that these resources are both preserved and utilized effectively. Eco-innovations are positioned as essential drivers for sustainable transformation, demanding a reconfiguration of corporate strategies, resource management, and collaborative networks.

## Addresses

¹Chair in Bioeconomy and Sustainable Development, the World We Want AoE, NEOMA Business School, 59 rue Pierre Taittinger, 51100 Reims, France

²Edinburgh University Business School, France

³Laboratoire Interdisciplinaire Sciences Innovations Sociétés (UMR LISIS 1326 – CNRS) Institut National de la Recherche pour l'Agri-culture, l'Alimentation et l'Environnement (INRAE), Université Gustave Eiffel, France

Corresponding author: Befort, Nicolas (nicolas.befort@neoma-bs.fr)

**Current Opinion in Green and Sustainable Chemistry** 2025, 53:101031

This review comes from a themed issue on **Eco-humanism versus Eco-modernism: Modeling sustainable human-technology-nature framework (2025)**

Edited by Pierguiseppe Morone, Yilan Gulsah, Rocco Caferra and Özlem Ozdemir

Available online 15 May 2025

For complete overview of the section, please refer the article collection - Eco-humanism versus Eco-modernism: Modeling sustainable human-technology-nature framework (2025)

https://doi.org/10.1016/j.cogsc.2025.101031

2452-2236/© 2025 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).

## Introduction

The sustainability transition at stake to address climate change targets is driving industries to revolutionize their business models to cope with planetary boundaries. This transition necessitates a departure from the organization of the fossil economy which has prevailed since the industrial revolution and thermochemical revolution

[4,21,30]. Firms relinquishing of fossil economy is deemed a challenging mission particularly given that the fossil economy has been made possible through four conditions. First, the fossil economy has a constant need for growth, driven by the continuous increase in the burning of inexpensive fossil resources to expand the sphere of production. Second, the chemical characteristics of fossil resources have enabled the development of standardized industrial processes relying on a limited number of resources. Therefore, the search for alternative methods of production focuses on identifying the few promising inputs that can enable a drop-in substitution for fossil products (e.g. bio-based products). Third, in alignment with the goals of economies of scale, the mass market business model needs to produce waste and short-lived products to sustain e demand [5,6,11,12]. Fourth, the organization of value chains relies on the demand for inexpensive, fast-consumed products. The transition to a postfossil economy poses the additional problem of potential conflicts over the allocation of natural resources [17,16,26] (Figure 1).

Confronted with the new constraints imposed by the transition to a postfossil economy, the literature on dynamic capabilities is receiving renewed attention as it applies to eco-innovations. This article aims to illustrate how this literature can facilitate the analysis of firms' transitions to a postfossil economy.

## Dynamic capabilities as the driving force of sustainable transformation

If technological change is necessary for achieving a sustainable economy, firms need to identify new sources of competitive advantages. Addressing this challenge requires firms to possess unique and inimitable assets and dynamic capabilities [33]. The dynamic capabilities framework is defined as 'The firm's processes that use resources—specifically the processes to integrate, reconfigure, gain, and release resources—to match and even create market change. Dynamic capabilities thus are the organizational and strategic routines by which firms achieve new resource configurations as markets emerge, collide, split, evolve, and die' [15]; (p. 1107). The dynamic capabilities framework comprises three core components: sensing, seizing, and transforming. Sensing involves identifying and anticipating opportunities and threats within the firm's external environment. This capability includes the ability to monitor market trends, understand customer needs, detect technological innovations, and identify shifts in
<figure><img src="image_4.png" /><figcaption>Figure 1</figcaption></figure>

The role of dynamic capabilities for eco-innovations.

competitor behavior. Seizing refers to the ability to capitalize on identified opportunities. This (process) entails mobilizing resources, adopting new technologies, implementing new strategies, and developing new products or services. Seizing opportunities may also require internal reorganization to better respond to new market conditions. Transformation capability refers to a company's ability to reconfigure its internal resources and capabilities to adapt to long-term environmental changes. This can include organizational restructuring, adopting new management practices, and the evolution of internal skills and processes to maintain competitiveness. More recently, the seizing component of the dynamic capability framework has evolved into two joint components: orchestrating and capturing value [29,32]. The orchestration of dynamic capability refers to a firm's ability to coordinate assets allowing to support its competitive advantage. Capturing value involves the ability to transform its assets into a profitable business model and identifying a suitable demand for its product.

Until recently, the literature on dynamic capabilities overlooked the development of eco-innovations. However, a new generation of research has emerged, defining ‘eco-innovations as a capability similar to innovation capability’ [2] and emphasizing the need for firms to develop sustainability-oriented capabilities to address shifts in legislation, technology, and demand [13]. The authors highlight that eco-innovations possess three main properties that shape dynamic capabilities [2,3]. First, the notion of persistence suggests that an innovative firm is highly likely to develop environmental innovations (over time). Second, these innovations can generate a variety of new innovations that remain interconnected despite their diversity. Third, these innovations are complementary to one another. On this basis [34], a typology was developed inspired by classical approaches in terms of dynamic capabilities, encompassing the areas of sensing, seizing, and reconfiguring—equivalent to the

'transformation' discussed earlier—but specifically addressing sustainability issues [15,19,33,35].

This typology aims to incorporate the microfoundations identified in the literature on nonenvironmental innovations for eco-innovations. From this perspective Köhler et al., 2022 [23**], emphasize a positive relationship between firms' ability to explore their environment and share knowledge (sensing) and their capacity to develop an open-innovation circular-economy project. While the authors return to the 'standard' dilemma between openness and knowledge appropriation, their study shows that the presence of dynamic sensing capabilities favors communication, knowledge circulation, and strong governance within the project. Furthermore, they observe that these three phenomena reinforce network connections and transform these relationships into specific assets that support material exchanges.

## The orchestration for eco-innovations

Some scholars [29] refer to the ‘business model gap,’ underlining the challenge for companies to be able to both orchestrate resources and develop a sustainable business model [28]. Kortus and Gutmann [24**] emphasize the key role of the ability to orchestrate internal resources. The ability to identify new opportunities (sensing) requires a cultural transformation within the firm, achieved through training programs for managers and employees, the hierarchization of sustainability objectives based on the analysis of the firm’s value chain. Nevertheless, this internal orchestration must be complemented by external orchestration, involving collaboration with stakeholders such as suppliers, Non Governmental Organisations, etc. This process may be supported by a clear and dedicated communication of sustainability achievements allowing to gain public support. The process of orchestrating resources to capture value may face resistance within the organization [9**].
The transformation of corporate culture can lead to pushback and a sense of dispossession, particularly when employees with different backgrounds arrive. Additionally, lean organizations may experience organizational myopia, focusing solely on the technical dimension of innovation and exploitation rather than encouraging exploration. Similarly, fostering collaborations with external organizations poses classic problems of intellectual property management. To overcome these barriers, Coffay et al., 2024 [9] emphasize the increasing importance of sustainable business, driven by increasing consumer demand and public policies that support such innovations. The adoption of these innovations—particularly in industries based on the use of renewable resources and therefore, dependent on growth cycles for example—requires the implementation of long-term exploration and investment strategies. Here again, this can be ensured through industry-wide cooperation strategies. Finally, the scholars also stress the critical role of employee training.

## The case of sustainable born firms

The transformation of dynamic capabilities remains relatively absent from the literature. This gap may be attributed to the predominant focus on organizations already engaged in transformation processes. Ostermann et al., 2021 [27] and Nascimento et al., 2024 [25**] argue that firms should prioritize technological development and then concentrate on managerial and operational aspects to drive firm transformation. Most of this literature focuses on existing firms seeking to adopt environmental innovations, notably through the circular economy. Thus, firms must face trade-offs (1) between various sustainability options—such as renewable energies, circularity, and substitution of fossil products by biomass—and (2) between managing Corporate Social Responsibility (CSR) initiatives (e.g. ISO certifications and purchasing management) and transforming their products and production process. The outcome of these trade-offs then indicates that firms pursuing transformation strategies, rather than focusing on CSR initiatives tend to demonstrate stronger dynamic capabilities, given the scale of the associated change.

This generates a high degree of uncertainty between adopting a strategy of process greening (such as drop-in innovation strategies) and adapting to a renewed production process [17]. Knoppen and Knight [22] pointed out that *born sustainable firms* (BSFs) could have a comparative advantage over incumbent firms. The BSFs are founded with an explicit goal of sustainability and positive impact. Their financial viability may stem from leveraging a sustainability advantage, demonstrated though the integration of sustainability impact assessment and certifications [7]. By achieving environmental excellence, these firms can then justify profits that, while potentially lower than their unsustainable

competitors, are considered sufficient by sustainability focused investors.

In this case, the status and environmental expectations of investors become a competitive advantage for the firm. To attract such investors, these firms need to be able to highlight the environmental benefits of their processes. However, this environmental advantage may be temporary and insufficient to sustain long-term profitability as a competitive edge. Nevertheless, in the long term, it has the potential to evolve into a first-mover advantage.

## The renewed role of natural resources

This evolution in our understanding of innovation and organizational transformation processes is grounded in a renewed vision of the firm's resources. Teece et al. (1997) [31] emphasize the key role of the resource-based view (RBV) in strategic analysis. This understanding of companies posits that its competitive advantage depends on the valuable, rare, inimitable, and nonsubstitutable nature of its resources [10]. The second cornerstone of the RBV of the firm is that firms possess heterogeneous capabilities and resources. Teece et al. (1997) [31] highlighted the managerial role in orchestrating these resources within the emerging knowledge economy, emphasizing the importance of intangible assets. Following this framework, Helfat and Peteraf [20] underlined the dynamic nature of resources and capabilities, which depends on internal and external conditions. Despite its clear relevance to sustainability—particularly addressing the integration of resources and their evolution—Carton and Parigot [8**] point out that the RBV view overlooks the weak substitutability of natural capital with manufactured capital. Thus, the RBV does not integrate the problem of the reproduction of natural resources. Along this line, Carton and Parigot [8] (p.4) consider that focusing exclusively on rare resources 'considers neither critical natural capital (including biodiversity) nor the finitude of natural resources.' Moreover, firms are incentivized to appropriate the resources they need, potentially endangering the existence of natural commons. Hence, their study offers principles for implementing strong sustainable management. These principles include utilizing ordinary resources or waste, setting prices based on the resource availability, promoting openness and transparency in business model, generating value out of the sustainability advantage of the model, and integrating stakeholders and community. The operationalization of these principles could be achieved by recognizing natural resources management as a new capability [1]. This process would involve the structuring, bundling, and utilization of natural resources. To achieve this, firms need tools to manage and evaluate their use. They must therefore choose between general, oversimplified indicators and adopting specialized indicators, which could create a form of myopia and
lead to a multiplication of indicators [36]. The following figure summarizes our theoretical framework (Figure 1).

## Conclusion

Eco-innovation appears to rely on the dynamic capabilities of firms, enabling the identification of both natural and 'non-natural' resources. During the seizing phase, firms coordinate both new and existing resources that they consider key to defining their business model. Companies may slow down their transformation by adopting a corporate sustainable responsibility strategy. While such strategies effectively reduce the intensity of change by limiting short-term risks [14,18], they also reinforce existing routines. This, in turn, increases the risk of being locked into a trajectory that is incompatible with the necessary transition away from the fossil economy. Current studies highlight the importance of the dynamic capabilities' approach in examining firms' ecological transition trajectories and the various stages of this process. However, the existing literature lacks a clear focus on the tools and guidelines that could assist companies in effectively organizing their ecological transition.

## Declaration of competing interest

The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.

## Acknowledgements

The authors acknowledge financial support of the Chair in Bioeconomy and Sustainable Development (NEOMA Business School, Marne en Champagne Chamber of Commerce, Caisse d'Epargne Grand Est Europe, Greater East Region, Carbono). The funding sources had no role in the design and conduct of the study.

## Data availability

No data was used for the research described in the article.

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