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1. Introduction
Environmental innovation has been receiving increased attention from the business sector, as more and more firms look to build business cases for sustainability (Xie et al., 2019). The concept of environmental innovation refers to “the development of products, processes, and services aimed at reducing environmental harm by using new methods for treating emissions, recycling or reusing waste, finding cleaner energy sources, and so on” (Berrone et al., 2013, p. 891). Such innovation provides an opportunity to deal with both environmental sustainability and financial performance by applying win-win logic (Xie et al., 2019). Thus, understanding the drivers of environmental innovation is critical.
Certain studies have suggested that female directors play a significant role in enhancing environmental innovation (He and Jiang, 2019; Nadeem et al., 2020a) because they tend to be more concerned with environmental issues than male directors do (Post et al., 2015). However, a recent study by García‐Sánchez et al. (2021) contradicts this, finding no direct effect of female directors on environmental innovation. This indicates that there may be an indirect effect, as female directors rarely impact firm outcomes automatically without influencing board dynamics or board decision-making. Despite several prior studies calling for a better understanding of the mechanisms underlying how female directors affect firm outcomes (for a review, see Hoobler et al., 2018; Kirsch, 2018), there is limited knowledge of the channels through which female directors affect environmental innovation. Previous studies have focused mainly on the direct effect of female directors on environmental innovation (He and Jiang, 2019; Nadeem et al., 2020a), leaving the underlying channels like a black box. Consequently, our knowledge of how female directors affect environmental innovation is poor.
To address this, our study uses insights from stakeholder theory and upper echelons theory to explore the mediators that can channel the effect of female directors on environmental innovation. In this study, we focus on stakeholder orientation as the mediator. This is because the relationship between female directors and environmental innovation is likely to be explained by stakeholder orientation. Stakeholder orientation is defined as the extent to which a firm focuses on stakeholders and considers stakeholder voices and interests in its decision-making (Bettinazzi and Zollo, 2017). Upper echelons theory suggests that top executives’...