How firms realign to tackle the grand challenge of climate change: An innovation ecosystems perspective

Abstract This study investigates how, why, and under which conditions incumbents and new entrants realign in innovation ecosystems to collectively tackle the grand challenge (GC) of climate change. The discussion on innovation and GCs is still lacking sufficient theoretical underpinnings and empirical insights to make sense of the role of for‐profit firms and their collaborative innovation efforts to address the GCs of our times. We introduce innovation ecosystems as a theoretical lens for understanding the combinations of technological interfaces and strategic relations that firms can employ to craft value propositions with high potential for tackling GCs. Empirically, this study focuses on the GC of climate change that requires a transformation of the electricity sector. We investigate collaborative pilot projects between 10 international electric utilities and 57 clean‐tech startups. In these pilots, incumbents and new entrants explore low‐carbon value propositions through novel technological interfaces and strategic relations. Via qualitative comparative analysis, we identify three configurations of ecosystem realignment with high climate impact: an incumbent‐led digital platform realignment, a device complementor and customer‐enabling realignment, and a new orchestrator realignment. Based on a multiple case analysis, we uncover three innovation mechanisms that explain why these specific configurations unlock climate impact: they enhance resource efficiency, the flexibility and resilience of infrastructure, and the trading and leveraging of information and resources. On this basis, we contribute to the literature at the intersection of innovation management and GCs by developing theory that explicates (1) how the realignment of incumbents and startups in innovation ecosystems changes existing industry structures; (2) why specific configurations of such ecosystems are associated with high climate impact and are thus effective in addressing GCs; and (3) the boundary conditions under which collective innovation efforts in ecosystems can translate into climate impact.