Reconceptualising the co-evolution of firms-in-industries and their environments: Developing an inter-disciplinary Triple Embeddedness Framework

This inter-disciplinary theory-building paper is motivated by the debate on grand societal challenges and by calls in the innovation studies literature for frameworks that offer a better understanding of the co-evolution of industries and their economic, political, cultural, and social environments. In response to these debates, the paper develops a new triple embeddedness framework (TEF), which conceptualizes firms-in-industries as embedded in two external (economic and socio-political) environments and in an industry regime which mediates strategic actions towards the external environments. The TEF's theoretical logic draws on the adaptation-selection debate, which suggests that the co-evolution phenomenon can be approached from two angles. With regard to (population-level) selection theories, which highlight pressures on industries from external environments, the TEF accommodates insights from evolutionary economics, neo-institutional theory, and economic sociology. With regard to (firm-level) adaptation theories, the TEF accommodates insights from externally-oriented strategy schools (economic positioning strategy, innovation strategy, corporate political strategy, discursive strategy, issue management) and internally-oriented strategy approaches (linked to knowledge/capabilities and cognition/sensemaking). The combination of insights produces a multi-dimensional framework with bi-directional interactions between firms-in-industries and their environments. Implications for the grand challenge agenda are discussed in a separate section and illustrated with examples.