Can green innovations enhance competitive advantage?

Sustainable New Product Introductions (SNPIs) enable firms to meet consumers’ increasing demand for sustainable options while addressing rising expectations for corporate environmental responsibility. This study demonstrates that SNPIs can also strengthen brands by enhancing brand equity. Drawing on signaling theory, we propose that SNPIs serve as product-based sustainability signals that enhance brand equity by generating social goodwill. A staggered event study of the initial launch of a sustainable product line by a major laundry detergent brand shows that SNPIs can increase parent-brand equity. A complementary analysis of subsequent SNPIs across 15 leading brands in 12 retail chains reveals that this effect is moderated by parent firms' ethical reputation and retail chains' sustainable assortment share. These findings advance our understanding of whether and under what conditions sustainable products serve as credible signals of environmental responsibility and enhance brand equity.