Does National Innovation Layout Spur Eco‐Innovation? The Upper Echelon's Role

ABSTRACT Numerous studies have examined whether financial and governance characteristics within firms promote eco‐innovation. However, the influence of institutional contexts on eco‐innovation, which is crucial for shaping effective policy and establishing key conditions, has not been adequately explored. Drawing on institutional, stakeholder, and upper‐echelon theories, our study investigates the mechanisms through which a national innovation system (NIS) influences firms' commitment to eco‐innovation. We specifically focus on the manufacturing sector worldwide, over the period from 2007 to 2018. Our findings reveal that the NIS is negatively associated with eco‐innovation, contrary to expectations. This prompted us to delve deeper into three key components of the NIS. The analysis showed that although the quality of research institutions and government procurement of high‐tech products negatively correlate with eco‐innovation, university–industry collaboration positively affects it. Further exploration identified that environmental management teams and nonexecutive directors are critical moderators through which the NIS can enhance a firm's capacity for eco‐innovation. Our evidence suggests several practical implications for theory, management practices, and policy formulation.