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«PROACTIVE ENVIRONMENTAL STRATEGIES IN SMALL BUSINESSES: RESOURCES, INSTITUTIONS AND DYNAMIC CAPABILITIES Jan Lepoutre Promotor: Prof. Dr. Aimé Heene ...»

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3. Legitimation. Another internal motivator for the adoption of PES is the sensitivity of a firm to the way it is perceived as a legitimate organization by its constituencies, both internal and external. Whereas competitiveness relates more to legitimacy in the market, legitimacy here is referred to the goodwill an organization receives from society to continue its existence or practices (Suchman, 1995), both in response to social (regulatory) and stakeholder (non-regulatory) issues (Clarkson, 1995). Firms adopting PES out of legitimation reasons do so in order to comply or stay ahead of regulation (Shrivastava, 1995a; Bansal & Roth, 2000; Banerjee et al., 2003; Clemens & Douglas, 2006). In addition, especially firms that have lost their legitimacy at some point are more likely to adopt a PES in response to assure their “license to produce” for the future. In its most cynical form, firms may even adopt a PES to counter or cover up for other, less ethically defendable practices (Williams & Barret, 2000;

Bansal & Clelland, 2004).

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These three internal drivers have been found in a wide variety of sectors and hold in different firms with different sizes. It is important to note, however, that each of these motivation categories are ideal types. In reality, firms with proactive environmental strategies will do so as a result of a combination of motivations. In fact, the highest levels of proactivity are likely to emerge from firms where all three motivations are present. Yet two important, seemingly contrasting conclusions on the internal drivers for PES can be drawn from the literature: (1) the all pervasive importance of competitiveness and external pressures and (2) the need for a moral commitment perspective.

1. The need for competitiveness and external pressures. Many studies have found that employees and managers stay away from selling their concern with the environment as a moral responsibility and sell it as an ‘amoral’ (Crane, 2000) business benefit (Banerjee, 2001; Bansal, 2003) or inevitable threat (Fineman & Clarke, 1996):

“motives of ethics and social responsibility for greening initiatives are rarely claimed by executives other than those from social mission companies. This suggests that coercion from powerful stakeholders, such as pressure groups and regulators, mediated by politically adept and professionally ambitious internal champions, is more likely to encourage corporate greening than any voluntary moral impulses or principles.” (Crane, 2000: 691).

The message that echoes from many studies that have investigated the antecedents of environmental responsiveness is one of warning: firms will only engage in practices or strategies that go beyond the law if they see an economic benefit in it, or when resistance would result in reduced legitimacy with its constituencies. In the absence of such incentives, the number of firms with PES will remain largely marginal.

2. The need for moral commitment. Given that we define PES as the voluntary internalization of environmental impacts beyond legal requirements, the former conclusion could provoke pessimism and cynicism about the mere existence and credibility of PES. Are environmental strategies not always a response to some form of external pressure? And, if yes, then how can one still consider them to be the result of ‘voluntary’ initiatives? Yet despite the apparent need for external pressures in many companies, “directly or indirectly, corporate environmental action depends on how stakeholder pressures connect with managers’ values, with their personal theories of economic/instrumental purpose, and with their self or role identities.” (Fineman & Clarke, 1996: 728). To the minimum, this implies that action is impossible without managers or employees making sense of, or being concerned with the natural

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environment. To the maximum, this suggests that – in the end – external pressures are not necessary for those firms engaging in proactive environmental strategies. The studies of Branzei and colleagues (2004), Buysse and Verbeke (2003) and of AragonCorrea and colleagues (2004) show that external pressures are not always necessary to champion natural environmental issues. Many case studies and surveys that have probed firms for the underlying mechanisms why they have gone beyond legal requirements still refer to a moral and ethical responsibility “to do good” or “to do the right thing” (Bansal & Roth, 2000; Banerjee, 2001). This implies that behind many proactive environmental strategies, an affectionate, value-laden moral sensitivity is hidden, triggering exploration and further commitment to take the natural environment into account. It is exactly this affectionate component that differentiates PES from many other strategies (Halme, 2002). Such a conclusion may especially be important in smaller firms, where the organizational goals and values reflect those of the owner/manager more so than the management in larger firms. As such, the effect of the personal values of a manager can be expected to be larger in smaller firms than in larger firms (Aragon-Correa, Hurtado-Torres, Sharma, & Garcia-Morales, 2008).

In sum, we can conclude that the adoption of PES will be a result of the interplay of both internal and external drivers. Since both external pressures and internal motivations seem to influence why a firm engages in practices that take it beyond the law to internalize the natural environment in its strategy, I conclude that any endeavor undertaken to investigate PES should be mindful of both perspectives.





3.4.1.2. External drivers: institutions (b) Whereas the focus of the former literature has been mostly concerned with the adoption of PES deriving from deliberate managerial choices, a second stream in the literature has been investigating PES as a result of external pressures exerted on organizations. The PES literature sometimes gets the critique of being overly “evangelic” (Newton & Harte, 1997) in believing that organizations will voluntarily take environmental issues into account. Although the critics of this “overoptimistic” view of PES acknowledge the need for more business attention to the natural environment, they warn that the majority of firms will only engage in more proactive environmental strategies in the event of increasing public or regulatory pressure (Newton & Harte, 1997). In addition, concerns are raised whether increased public

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pressure will even be enough to stimulate business to – either voluntarily or out of instrumental concerns – move towards more environmentally friendly directions.

The research on external drivers for PES is embedded in the theoretical categories as provided by institutional theory (Meyer & Rowan, 1977; DiMaggio & Powell, 1983) and resource dependence theory (Pfeffer & Salancik, 1978). More specifically, studies have been done on the responses of firms to individual or combinations of pressures as defined in DiMaggio and Powell’s (1983) framework of coercive, normative and mimetic pressures.

Coercive pressures stem from legal requirements, the breaching of which involves a legal sanction. Normative pressures follow from social obligations and duties that are associated with membership of a community or association. Finally, mimetic pressures emerge as the imitation and continuance of successful practices from peers or tradition in response to uncertain or ambiguous situations. The empirical contributions investigating the adoption of environmental strategies in response to these institutional pressures show a progressive refinement and understanding of the relevant processes involved.

1. Coercive pressures. As was mentioned before, legal requirements are among the most important drivers for PES. Many studies demonstrate how environmental responsiveness is the result of the perceived pressures from regulatory bodies (Henriques & Sadorsky, 1996; Andrews, 1998; Henriques & Sadorsky, 1999;

Banerjee, 2001). In the context of proactive environmental strategies, however, this regulatory influence is somewhat problematic. Since we defined a proactive environmental strategy as organizational actions beneficial for the natural environment beyond regulatory requirements, the influence of coercive pressures should still be assessed in the way a firm’s actions and strategies go beyond these pressures. The literature provides three interesting findings in this perspective. First, the most proactive firms often do not consider coercive pressures to be important. In their study of 197 large Belgian firms, Buysse and Verbeke (2003) found that firms with pollution prevention strategies (medium proactivity) attached far more importance to coercive regulatory pressures than those firms with a reactive strategy (least proactive) and a leadership (most proactive) strategy. They argued that leadership firms would be more driven by internal drivers and would hence consider regulatory pressures only as an extra support rather than as the main driver. Similar results were found by Rivera and De Leon (2005), who reported that the most environmentally proactive CEO of Costa Rican hotels did not consider regulatory incentives important for their strategies. Also,

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Clemens and Douglas (2006) found that firms that already had superior resources associated with PES perceived significantly less coercive pressures than their less proactive peers. Second, Maxwell and colleagues (2000) found that a perceived threat of regulation, without the actual threat being in place, functioned as a great stimulus for firms to decrease their environmental impact. Third, recent studies indicate that multinational companies (MNCs) often take up proactive environmental strategies in the clear absence of host country environmental regulations, yet follow the standardized practices emanating from their headquarters which operated in organizational fields where these institutional pressures for attention to the environment are present (Dowell, Hart, & Yeung, 2000; Christmann, 2004; Child & Tsai, 2005). All these studies indicate that coercive pressures will influence the environmental responsiveness of a firm, but do not seem to instigate firms to opt for more proactive strategies and go beyond legal requirements.

2. Normative pressures. The impact of normative pressures on the adoption of PES is somewhat inconclusive, and mostly depends on both structural features of the firm and the characteristics of the stakeholder that is exerting some kind of pressure on it. A widely used and confirmed perspective in this context is the responsiveness organizations develop in response to a firm’s internal (employees, shareholders) and external constituents (suppliers, customers, civil society organizations). Various studies have shown that firms develop PES to abide to the wishes of these myriad stakeholder pressures (Henriques & Sadorsky, 1999; Buysse & Verbeke, 2003;

Bansal, 2005; Eesley & Lenox, 2006). The term “stakeholders”, however, seems to cover a range of actors that is too broad to make conclusive statements about which responses are elicited by whose interests. Whereas some studies found that the internal stakeholders were most important (Buysse & Verbeke, 2003) and that lobby groups were considered of negligible influence (Henriques & Sadorsky, 1996), others found that firms only developed PES in response to external ‘campaigning’ organizations (Fineman & Clarke, 1996). A potential explanation for these results lies with the specific relational interdependencies between a firm and its stakeholders, and the power of the stakeholder over the resources needed by the firm (Frooman, 1999;

Sharma & Henriques, 2005). Often ignored in the literature that uses a stakeholder perspective to PES, however, are the within-industry normative pressures that derive from trade associations and professional associations that represent the sector (Hoffman & Ventresca, 1999; Wade-Benzoni, Hoffman, Thompson, Moore, Gillespie,

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& Bazerman, 2002). Over the last decades, several industries around the globe have made collective agreements with governments to realize environmental improvements through self-regulation (Segerson & Miceli, 1998; Delmas & Terlaak, 2002). Several studies have indicated that trade association membership can be an important stimulus for the adherence to these voluntary programs (Hoffman, 1999; King & Lenox, 2000;



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