«PROACTIVE ENVIRONMENTAL STRATEGIES IN SMALL BUSINESSES: RESOURCES, INSTITUTIONS AND DYNAMIC CAPABILITIES Jan Lepoutre Promotor: Prof. Dr. Aimé Heene ...»
Rivera, 2002). Yet, despite the normative pressures exerted from trade and professional associations to achieve a collective environmental goal, strong forces for opportunism exist to defect (King & Lenox, 2000; Darnall & Carmin, 2005; Lenox, 2006). Only when groups are small enough or when some sort of normative sanction or exclusion criterion exists, will firms conform to the normative pressures for selfregulation (Olson, 1965; Ostrom, 1990; King & Lenox, 2000; Maxwell, Lyon, & Hackett, 2000; Kollman & Prakash, 2002; Orsato, den Hond, & Clegg, 2002; Potoski & Prakash, 2005; Lenox, 2006).
3. Mimetic pressures. Mimetic pressures present themselves mainly in situations of higher uncertainty. In situations where little (valuable) information is available to predict the evolution of a firm’s environment or the strategic actions of its constituents, firms may emulate the opinions or behaviors of leading individuals or organizations in the industry. They do so to keep the firm from suffering social or financial sanctions resulting from actions deviating from the social norm. Both the conceptual and the empirical literature, however, are again in conflict on how the mimetic pressures influence PES. The larger part of the literature argues that firms will conform to the clout of industry associations and leading firms and adopt PES as a result (Jennings & Zandbergen, 1995; Rivera, 2002; Bansal, 2005; Clemens & Douglas, 2005; Child & Tsai, 2005; Shah & Rivera, 2007). Bansal (2005), for example, found that firms started conducting environmental audits in response to mimetic pressures. Child and Tsai (2005) found that MNCs in China and Taiwan often adopted the same environmental manners as those of other members of local networks, such as the American Chamber of Commerce. Similar results were found by Shah and Rivera (2007) in the export processing zones in Trinidad and Tobago. Also, voluntary initiatives for environmental self-regulation like the Responsible Care program in the chemical industry hinge on the mimetic pressures of the larger and more visible business in the industry to attract and retain members (King & Lenox, 2000; Lenox, 2006). Yet the direction of within-industry pressures is not always conducive to the adoption of proactive environmental strategies. Bansal and Roth, for example, found
that mimetic within-industry pressures tended to discourage higher levels of proactivity to the environment “because it made other field members ‘look bad’, (…) ratcheted up standards for other field members, raising operating costs”, and made them “conform to standard industry practice” (2000: 731). Such hesitancy towards PES would especially be present in organizational fields with high levels of cohesion (close and embedded connections between field members). This would suggest that the most proactive firms are actually going against mimetic pressures within their industry, which is confirmed by a few studies that found lower importance of competitor pressures among proactive firms (Andrews, 1998). Most interesting, however, is that the majority of studies that investigate business responses to stakeholders simply do not include trade associations or within-industry pressures (Henriques & Sadorsky, 1996; Fineman & Clarke, 1996; Banerjee, 2001; Banerjee et al., 2003; Lefebvre, Lefebvre, & Talbot, 2003; Sharma & Henriques, 2005; Kassinis & Vafeas, 2006; Eesley & Lenox, 2006) or focus predominantly on the pressures they exert in favor of proactive environmental strategies as argued above.
The former paragraphs demonstrate the importance of each of the institutional forces on the adoption of PES. Institutional theory literature suggests, however, that the institutional environment always consists of a combination of coercive, normative and mimetic pressures and their relative importance may change between sectors, between organizational fields, and also over time. One important factor for such dynamic changes in the relative importance of institutional pressures comes with ‘triggering events’. The importance of triggering events has been documented in several publications by Hoffman in the chemical industry (Hoffman, 1999; Hoffman & Ocasio, 2001). In his historical analyses of the US chemical industry over the last four decades, Hoffman was able to demonstrate how important events changed the norms and responses of chemical companies and of their constituents. Events may shift the power, legitimacy and the urgency (Mitchell et al., 1997; Eesley & Lenox, 2006) of certain stakeholders, instigating a change in business behaviors more in line with stakeholder demands.
Together, these empirical studies highlight the growing importance of institutional pressures pushing businesses to strategies more inclusive of the natural environment. This influence is widely accepted and empirically confirmed. However, these papers also highlight that very similar stakeholder pressures may be perceived differently among firms, with different responses to stakeholder pressures as a result. The presence of stakeholder pressures,
by itself, is thus not a good predictor for the adoption of PES. Although many explanations can be given why these differences in perceptions exist and why not all pressures from a firm’s constituencies result in the adoption of PES, I believe the current literature has
neglected two potential explanations:
1. A first reason is that a firm simply may not experience any pressure. Pressures can only be responded to if they exist. Even in these times in which the natural environment is rising on the public agenda, an individual firm may not be exposed to any noticeable pressure about it. Although it is often argued that there is an increasing public interest in the environmental actions of firms, this is not always the case: “not everyone is equally interested in all aspects of preserving the environment, and some [stakeholders] may be more inclined to act than others” (Aragon-Correa & Rubio-Lopez, 2007: 362). This may be especially the case with smaller firms (Azzone, Bertelè, & Noci, 1997; Noci & Verganti, 1999; Hillary, 2000a; del Brío & Junquera, 2003; Vernon, Essex, Pinder, & Curry, 2003), of which the perceived contribution to pollution may be considered negligible both by stakeholders and the firms themselves (Merritt, 1998; Hillary, 2000a). As a consequence, in many industries only the larger and more visible firms attract the scrutiny from both regulators and the general public (Pfeffer & Salancik, 1978;
Greening & Gray, 1994; Goodstein, 1994; Meznar & Nigh, 1995). Although smaller size is not necessarily correlated with lower visibility (Bowen, 2000), smaller firms may nevertheless benefit from their “stealth” (Chen & Hambrick,
1995) and remain invisible to public scrutiny. As a result, if small firms experience any institutional pressure, it is mostly coercive (Worthington & Patton, 2005;
McKeiver & Gadenne, 2005), which makes the adoption of environmental initiatives beyond legal expectations more a result of “elective action” than a result of an urgent response to economic or institutional pressures (Bansal & Bogner, 2002).
2. Secondly, pressures for more PES may conflict with other pressures that resist PES. Institutional pressures against increasing environmental attention still exist.
As described in chapter 1, the movement towards the voluntary adoption of environmental practices by companies represents a paradigm shift (Gladwin et al., 1995; Purser et al., 1995; Kilbourne, Beckmann, & Thelen, 2002; Starkey & Crane, 2003; Prasad & Elmes, 2005), with inevitable institutional inertia as a result
(Kuhn, 1962; Hoffman & Ventresca, 1999). Although some coercive and normative pressures may push firms in the direction of more proactivity towards the environment, they may therefore conflict with more conservative withinindustry normative and mimetic pressures that defend an industrial common goal of maintaining the business-as-usual. Especially the within-industry mimetic pressures should not be underestimated, given that “mimicry is more likely than normative pressure to influence organizations in a field to adopt concepts and
practices related to ecological sustainability” (Jennings & Zandbergen, 1995:
1034). The uncertainty of adopting a PES may be larger than not having one, which directs the isomorphic pressures inwards towards traditional and thus ‘safer’ grounds. The influence of these cognitive institutions is particularly strong among smaller firms. As said, smaller firms are less visible to the larger public. Small businesses have therefore been found to be strongly influenced by the cognitive frameworks that are shared with peers and the local business community (Meyer & Rowan, 1977; Brown & King, 1982; Vyakarnam, Bailey, Myers, & Burnett, 1997;
Arbuthnot, 1997; Tilley, 2000). Hence, only when the dominating practices and taken-for-granted assumptions are changed or questioned, will organizations move along towards more proactive environmental strategies. Yet similar resistance may exist among larger firms as well. Given the high probability that increased normative pressures and regulatory requirements will need organizational change or even make current business models impossible, “there are indications that business networks are actively resisting moves towards increased compulsion” (Newton & Harte, 1997: 90), and that the scant initiatives of business environmental networks (such as the Business Council for Sustainable Development and the Global Compact) are “just a pretence to subvert the
environmental agenda and fight off regulatory control” (Newton & Harte, 1997:
90). Research has shown that the most polluting firms are also the firms that spend most money to lobbying with politicians represented in environmental commissions (Meznar & Nigh, 1995; Cho et al., 2006), especially larger firms (Hillman & Hitt, 1999). In conclusion, firms are probably under differing pressures from their various constituencies in the organizational field, pushing them in opposite directions. An inquiry in how firms react to or reconcile the institutional pressures that are in fact against the adoption of PES, however, is lacking to date.
188.8.131.52. Internal facilitators (c) Besides the internal motivations and goals of the firm, several studies have revealed that the presence of certain organizational structural features, resources or capabilities may foster the development of PES. Beware that my focus here is not on how resources or capabilities aid in the execution of PES, but on their impact on the presence of such strategies.
1. Firm size. The empirical evidence indicating a positive correlation between a firm’s size and the likelihood of it having a PES is overwhelming (Florida, 1996; Russo & Fouts, 1997; Aragon-Correa, 1998; Judge & Douglas, 1998; Spence, Jeurissen, & Rutherfoord, 2000; Sharma, 2000; King & Lenox, 2000; Hillary, 2000a; Remmen, 2001; Gil, Jimenez, & Lorente, 2001; Schaper, 2002; King & Lenox, 2002; Chan, 2005; Bansal, 2005; Gonzalez-Benito & Gonzalez-Benito, 2005c; Elsayed, 2006; Shah & Rivera, 2007). Smaller firms tend to adopt strategies that are focused on merely complying with the law (Azzone et al., 1997; Gerstenfeld & Roberts, 2000; Hillary, 2000a; Remmen, 2001; McKeiver & Gadenne, 2005), and are even “vulnerably compliant” (Petts, Herd, Gerrard, & Horne, 1999): smaller firms may not be aware of their legal requirements, making compliance sometimes more the result of luck than of a particular strategy. As a consequence, most of the literature suggests that PES are rare among small businesses. Despite these general assertions, a few studies have indicated that a refined picture that takes moderating factors into account is necessary.