Weaving a New Path: Rethinking Incumbents' Role in Sustainability Transitions Through a Multilevel Perspective

ABSTRACT This study investigates how incumbent firms can actively foster sustainability transitions by strategically engaging across regime and niche levels when developing sustainable innovations. Drawing on an embedded case study of a leading Italian textile company involved in eight sustainable innovation projects, we identify four strategies—namely, Joining, Scouting, Engaging and Bridging—that enable incumbents to develop transition capacity. Unlike conventional innovation efforts, sustainable innovation demands longer timelines, broader stakeholder engagement and the ability to manage systemic complexity. Our findings challenge the traditional multilevel perspective (MLP) view of incumbents as passive regime defenders, instead portraying them as dynamic actors capable of supporting niche experimentation and building bridges across levels. We show that incumbents leverage internal innovation labs, trusted intermediaries and direct partnerships with niche actors to explore, absorb and maintain radical sustainable innovations. Additionally, we highlight the crucial role of intermediaries who must engage with the niche to prevent reinforcing existing lock‐ins. Even ‘failed’ collaborations generate valuable learning spillovers that contribute to organisational resilience and innovation capability over time. This study enriches the MLP framework by offering a more dynamic view of regime–niche interactions and provides actionable insights for firms seeking to navigate the grand challenge of sustainability through proactive innovation strategies.