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Abstract In the current business setting, companies must adopt new practices to remain competitive due to complex products, changing market demands, and stakeholder pressures. Many successful businesses are turning to sustainability‐oriented innovations as a means of both increasing their growth potential and engaging in corporate social responsibility practices. This approach benefits both the company and society. However, the full potential of implementing sustainability practices through open innovation has yet to be fully explored, and the impact on firm value is unclear. Additionally, there is currently a lack of international standards for representing sustainability as an open innovation approach. This study aims to shed light on the potential benefits of adopting sustainable practices through the open innovation approach. We highlight the value that sustainable innovation can create and analyze a sample of European‐listed companies from the STOXX Europe 600 Index from 2011 to 2020. Our findings show that the ESG score best represents sustainability as an open innovation approach. Moreover, we demonstrate that adopting sustainability as an open innovation approach practice positively impacts firm value. This suggests that companies can enhance their value and promote sustainable innovation success by embracing this approach. Overall, this paper contributes to the literature on sustainability and open innovation, specifically within the legitimacy theory framework. It emphasizes that stakeholder pressure to build a more sustainable and ethical economic system presents a challenge that can also be an opportunity for companies.
Martielli et al. (Mon,) studied this question.