LAUSR

Abstract Sustainable innovation and its management have become fundamental forces for change in business and society. Paradoxically, little attention has been given to how small and medium-sized enterprises (SMEs) manage sustainable innovation in the current knowledge-intensive context. By studying 80 SMEs from the high-tech manufacturing sector in Italy, this research has found that, when combined with stakeholder engagement, sustainable innovation management becomes a pivotal phenomenon for new and established SMEs. Stakeholders proved instrumental in generating the sense of environmental responsibility in SMEs. As a pioneer combination of stakeholder theory and innovation management theory, our research found that stakeholder-related capabilities, both tangible and intangible, influence the firm's orientation towards sustainable innovation, its environmental responsibility and related capabilities. Our research assists the sustainability, adaptation, innovation and growth orientation of SMEs in a knowledge-intensive environment by recommending that, in their relationship with stakeholders, SMEs become more open to co-create, share and reuse environmental knowledge.