Leading the Way to Greening: Aligning Leadership Styles and Market Learning for Radical and Incremental Green Innovation

Abstract

The growing urgency of environmental challenges has intensified the need for green innovation (GI), comprising both radical (RGI) and incremental (IGI) forms. While RGI and IGI offer distinct pathways to sustainability—with RGI involving transformative, high-risk advancements, and IGI consisting of continuous, lower risk improvements—the literature has often overlooked their distinction. Drawing on upper echelons theory, we theorize how green entrepreneurial and green transformational leadership uniquely foster these innovation types, with the former aligning with RGI and latter supporting IGI. We further explicate how market learning—explorative and exploitative learning—interacts with leadership styles to shape GI outcomes. Using multisource data from matched responses of senior managers and CEOs across 315 firms in China, our findings based on hierarchical regression analysis support the hypotheses. Specifically, the findings reveal that firms with green entrepreneurial tend to adopt RGI than IGI, whereas firms with green transformational leadership are more likely to adopt IGI than RGI. Moreover, we find that green entrepreneurial leadership combined with explorative learning boosts RGI, while green transformational leadership paired with exploitative learning favors IGI. Overall, this study contributes by clarifying distinct roles of leadership in driving different GI outcomes and illuminating how market learning shapes these dynamics.