The effectiveness of appropriation mechanisms for sustainable innovations from small and medium-sized enterprises

Literature suggests that formal and informal appropriation mechanisms, such as patents and trade secrecy, play a crucial role in obtaining returns from innovation. Whether this applies to a sustainable innovation is unclear. Appropriation mechanisms could enable the commercialization of sustainable innovations, helping diffusion and societal impact, yet could clash with the principles of openness and sharing that characterize sustainable innovations. This may limit sustainable innovations’ commercial success. To shed light on this debate we analyzed an original sample of sustainable innovations by Dutch small and medium-sized enterprises. We found that sustainable innovations make use of informal appropriation mechanisms, such as lead time advantage and confidentiality agreements, and that these mechanisms are positively associated with commercial success. The positive and negative views on appropriation mechanisms in a sustainable innovation context actually vary by mechanism. The results suggest that firms introducing sustainable innovations behave similarly to other small and medium-sized enterprises innovators when it comes to use of appropriation mechanisms, but the extent to which such mechanisms enable commercial success reveals important specificities. Implications for managers include the use of first-mover advantages to stay ahead of the competition. Service innovations may benefit from using confidentiality agreements. Policymakers can promote simplicity, interoperability, and right-to-repair initiatives to reduce product complexity and hence waste, thereby lowering the negative impact of complexity on commercial success. The results also contribute to the literature in which associations between innovation, sustainability and economic performance were reported for small and medium-sized enterprises.