Why sustainability in business depends on managers,
not just markets
Imre Fertő
Policies to improve innovation and sustainability often focus on finance, regulation and technology. But evidence from Hungary’s wine sector suggests that managers themselves can play a decisive role. Firms led by managers who are more proactive, creative and open to experimentation perform better not only in conventional innovation, but also in eco-innovation.
When firms face growing pressure to become more sustainable, the usual explanations for success are familiar. Access to finance matters. Regulation matters. Market demand matters. Technology matters too.
But these factors do not tell the whole story.
Why do firms operating in similar environments often respond so differently to the same sustainability challenges? Why do some treat environmental pressure as an opportunity to innovate, while others see it mainly as a cost of compliance?
Our research suggests one important part of the answer lies with managers.
In a recent study of Hungarian wineries, we examined whether managerial orientation — a manager’s tendency to be proactive, innovative, opportunity-seeking and willing to take calculated risks — is associated with stronger enterprise outcomes. We found that it is. Firms led by managers with stronger managerial orientation performed better not only in product and marketing innovation, but also in eco-innovation. Importantly, this relationship was similarly strong across both domains. In other words, the same managerial capabilities that support commercial innovation also appear to support environmental innovation.
This has wider relevance beyond the wine sector. If sustainability transitions depend not only on external incentives but also on internal managerial capabilities, then policy and research both need to pay closer attention to the people making decisions inside firms.
Moving beyond firm-level strategy
Management research has long been interested in the idea of entrepreneurial orientation — the extent to which a firm is innovative, proactive and willing to take risks. But in many sectors, particularly those dominated by small and medium-sized firms, innovation does not emerge from formal R&D departments or highly codified strategies. Instead, it often depends on the everyday judgement of managers.
That is why it is useful to focus on managerial orientation rather than only firm-level strategic posture.
This distinction matters. Entrepreneurial orientation is usually understood as an organisational characteristic. Managerial orientation shifts attention to the individual decision-maker within the firm: the manager who interprets uncertainty, scans for opportunities, experiments with new practices and balances immediate pressures against long-term goals. In smaller or more traditional firms, that individual role may be especially influential.
The wine sector offers a valuable context for studying this. Wineries face rising environmental pressures, stronger market competition and increasing expectations around quality, branding and sustainability. At the same time, many wineries remain deeply rooted in tradition, local identity and relatively informal management structures. These features make the sector a useful setting for exploring whether managerial capabilities shape both innovation and sustainability-related outcomes.
Why measuring managers is harder than it looks
One reason the role of managers is often underexplored is that it is difficult to measure well.
Much of the existing literature relies on simple survey scales that add together responses to a set of questions. But not all survey items are equally useful. Some capture meaningful differences between managers, while others add relatively little. In some cases, survey items also suffer from ceiling effects, where many respondents give highly positive answers, making it hard to distinguish among them.
To address this, our study used an item response theory approach to measure managerial orientation. Rather than assuming that every survey item contributes equally, this method identifies which items are most informative in distinguishing stronger from weaker managerial orientation. We found that items related to originality and creative problem-solving were particularly informative, while others were much less discriminating.
This may sound like a methodological detail, but it has broader implications. If we measure managerial capabilities poorly, we risk underestimating their importance. Better theory depends on better measurement, especially in areas like sustainability where behavioural and organisational factors are often difficult to observe directly.
The findings: managers shape both innovation and eco-innovation
Using survey data from 233 Hungarian wineries, we estimated the relationship between managerial orientation and two different performance outcomes: product and marketing innovation, and eco-innovation.
The results were strikingly consistent. Higher managerial orientation was positively associated with both forms of performance. Managers who were more proactive, innovative and open to experimentation were more likely to lead firms that introduced new products, improved marketing practices and adopted environmentally oriented innovations.
Perhaps the most important result was that the strength of this relationship did not differ significantly between conventional innovation and eco-innovation. This suggests that managerial orientation is not just a driver of commercial competitiveness in the narrow sense. It may function as a broader organisational capability that helps firms respond to multiple kinds of pressure, including environmental ones.
This is an important insight because sustainability is often treated as a separate domain of firm behaviour, governed by different motivations and requiring different capabilities. Our findings suggest more overlap. The same dispositions that help managers pursue business opportunities may also help them translate environmental challenges into innovation strategies.
What this means for policy
The policy implications are straightforward, but often overlooked.
Support programmes aimed at improving innovation or sustainability typically focus on capital investment, regulation, compliance or access to technology. These are all important. But they assume that once the right incentives are in place, firms will respond more or less automatically.
In reality, incentives still need to be interpreted and acted on. That is where managers come in.
Especially in SMEs, managers are often the key actors deciding whether a new sustainability requirement becomes a burden, a box-ticking exercise or an opportunity for renewal. If managerial orientation affects whether firms innovate — commercially and environmentally — then firm-level support policies should invest more in managerial capability-building.
This could include training, mentoring, peer-learning networks and advisory systems that help managers deal with uncertainty, identify opportunities and build confidence in experimentation. Such interventions are less visible than grants for equipment or infrastructure, but they may be just as important for long-term transformation.
For sectors such as agriculture, food production and rural manufacturing — where many firms are small, resource-constrained and embedded in traditional production systems — this point is particularly relevant.
A wider lesson for research on sustainability transitions
There is also a lesson here for research.
Too much work on sustainability transitions focuses on systems, structures and external drivers while paying too little attention to managerial heterogeneity. Yet firms do not respond to environmental pressures in abstract ways. They respond through people: through judgement, learning, interpretation and action.
Managers are not the whole story, of course. Our study does not claim that managerial orientation is the sole or even the dominant explanation for enterprise performance. Other factors — including access to finance, technological capacity, market position and institutional conditions — remain highly important. And because our data are cross-sectional and based on one sector in one country, the findings should be interpreted with appropriate caution.
Still, the broader point stands. If we want to understand why some firms are better able than others to combine competitiveness with sustainability, we need to look more closely at the capabilities of those leading them.
Managers matter more than we often admit
Debates about sustainability in business are often depersonalised. They revolve around reporting systems, targets, incentives and technologies. These matter, but they can obscure something fundamental: firms do not innovate by themselves.
Managers decide whether to experiment or delay. Whether to react or anticipate. Whether to view sustainability as an obligation or as a strategic opportunity.
That is why managerial orientation deserves a more central place in how we think about enterprise transformation. If policymakers want greener and more innovative firms, and if researchers want to explain why some firms adapt more successfully than others, then managers should no longer be treated as a secondary factor.
They are part of the mechanism.
This blog post is based on the article:
Do managers shape enterprise outcomes? Managerial orientation, innovation performance and eco-innovation in the Hungarian wine industry, by Imre Fertő, Valéira Lekics, published in Business Strategy and the Environment.
