The concept of eco-efficiency can be a useful concept to link an enterprise’s business with sustainable development as well as achieving long-term profits (Schaltegger and Sturm, 1990; Madden et al., 2006). The business model has the potential to create value and capture value for companies, which is critical for their sustainable development (Teece, 2010). Extant literature reveals that there is a need to study business model innovation and eco-efficiency under one text to achieve a win-win rationale to increase profits while reducing environmental impact (Côté et al., 2006; Kabongo and Boiral, 2017). However, the researcher has identified that no current literature connects business model innovation and eco-efficiency effectively.

This research aims to explore How do manufacturing enterprises innovate their business model to realise eco-efficiency? In order to answer this research question, a qualitative approach was selected with an exploratory sequential research design. This research stands at the interpretivism philosophical position. Fourteen in-depth case studies were carried out in five countries.

This research contributes a new taxonomy, which uncovers the internal mechanisms of eco- efficient companies, namely, intrinsic eco-efficient company and supplemental eco-efficient company. The second outcome of the research is an integrated view of business model innovation and eco-efficiency. This novel finding links business model innovation theory and eco-efficiency theory under one context. Three relationships are identified, which are concluded as: (1) Contradiction, (2) Correlation and (3) Acceleration effects. Thirdly, a new theory of capability is generated. Six capabilities to help companies innovate their business models to implement eco-efficiency are identified, namely, Management of resource constraints, Strategic adaptation, Management of human resource, Technological innovation, R&D on material properties, and Internal and external collaboration. A dynamic view of capability is proposed accordingly. Fourthly, an emergent theoretical framework is proposed to generate a holistic view to answer the research question.

Theoretically, this research contributes to knowledge on business model innovation for eco- efficiency, especially in the capability dimension. Practically, the findings have the potential to instruct industry practitioners towards a better understanding of the capabilities to innovate their business model and realise eco-efficiency.