«PROACTIVE ENVIRONMENTAL STRATEGIES IN SMALL BUSINESSES: RESOURCES, INSTITUTIONS AND DYNAMIC CAPABILITIES Jan Lepoutre Promotor: Prof. Dr. Aimé Heene ...»
18.104.22.168. Summary The general pattern that emerges from studies on the consequences of PES is that – in general – firms with PES seem to generate better environmental and economic results.
However, the literature also shows that these positive results may hide more complex effects that combine both positive and negative impacts of underlying processes and that these effects may also change over time. Capturing this complexity requires a further refinement of the measures and proxies which are used for both environmental and economic performance.
Investigations that build upon how both internal resources and capabilities and external conditions work together to influence these constituting sub-elements are thus required to further understand the consequences of PES.
3.5. Discussion and research questions In the foregoing sections, my objective was to summarize the extant literature on proactive environmental strategies. In this process, I followed an approach that is in line with two of the most important research questions that drive the literature on PES: (1) what are the driving forces and facilitating factors that predict organizations to adopt a proactive environmental strategy (antecedents), and (2) does a proactive environmental strategy lead to better environmental and/or economic performance, and when (consequences)? Although the extant literature is young, the reviewed literature demonstrates an ongoing effort, both theoretically and empirically, to increase the understanding of both these antecedents and consequences associated with PES. Despite the valuable results this endeavor has yielded so far, a number of questions remain unanswered or have yet to receive definitive answers.
Specifically, the complexity that derives from the multiple combinations of interacting influences that drive and facilitate PES suggests that each unique combination of factors has Chapter 3 its own challenge. As a result, the research on antecedents and consequences of PES may best
benefit from investigations that focus on these challenges and underlying processes:
“If a group of business academics wrote that all firms ought to seek differentiated niches in their marketplaces, or that all should maintain debt to capital ratios of 40%, or that all should seek maximum employee empowerment, executives would respond, correctly, that the answers depend on the nature of the business. (…) So too with the environment; the right strategy depends on the industry and the firm.” (Reinhardt, 1998: 647) In responding to the idiosyncratic challenges that stem from the interplay between organizational and contextual factors, the recent literature has argued in favor of using a perspective that use both inside-out theories (e.g. resource-based view, dynamic capability perspective) and outside-in theories (e.g. institutional theory, resource dependency theory, contingency theory). Whereas some papers have included institutional theoretical perspectives with resource based perspectives (Bansal, 2005; Darnall & Edwards, 2006; Clemens & Douglas, 2006), others have used a combination of contingency theory and resource-based perspectives (Aragon-Correa & Sharma, 2003; Chan, 2005; Sharma, Aragon-Correa, & Rueda-Manzanares, 2007). In sum, the future of PES research is to be found in applying combinations of theoretical lenses that take both internal and external aspects of PES into account. From my literature, I identify two important research gaps that may benefit from
such an approach:
1. PES in small businesses. Although the evidence indicating a positive correlation between firm size and the adoption of PES is overwhelming, there is both anecdotal and more complex empirical contradictory evidence that suggests that other processes are at work. With the many influences that determine both PES adoption and its consequences, it remains unclear how a small firm size impacts both the willingness and the ability of firms to engage in PES. In addition, remarkably few studies exist that have explicitly taken a small business lens to look at PES. Not all studies that have been focused on “smaller firms” were talking about smaller firms in absolute terms (less than 50 employees and less than € 10 million turnover or balance sheet), which is reflected in the remarkably low share of studies that have been specifically
interested in small firms. As a result, my first research question is:
The literature is adamant when it comes to differentiating between smaller and large firms. As Welsh and White said, “small firms are not little big firms” (Welsh & White, 1981); and small firms need their own theoretical developments (Dandridge, 1979;
d'Amboise & Muldowney, 1988). As mentioned, the theoretical models and the empirical tests of their validity have been mostly focused on larger firms. In fact, some studies have used the low responsiveness of small firms to PES as a legitimation to focus their empirical work and theory development only on large firms (Andrews, 1998; Sharma, 2000). As a result, several authors have noticed this lack of small business specific research and have called for more theoretical and empirical inquiry to fill this void in theory (Hillary, 2000a; del Brío & Junquera, 2003; Clemens, 2006;
Etzion, 2007; Aragon-Correa et al., 2008). In addition, most of the small business PES literature that has been developed to date has explored the antecedents of PES adoption. An inquiry into the processes and capabilities that influence the consequences of PES in small businesses, however, remains limited to date. As a notable exception of some preliminary recent results in this area, Aragon-Correa and colleagues were able to show that “size, a common proxy for organizational resources, is a relevant but not a deterministic condition for developing the most proactive environmental strategies” (Aragon-Correa et al., 2008: 98). Furthermore, their findings indicate that “even SMEs can adopt proactive environmental practices and that these practices can lead to superior financial performance via specific capabilities based on the unique strategic characteristics of SMEs” (Aragon-Correa et al., 2008: 98). An in-depth exploration of the capabilities that small businesses require to successfully improve their impact on the environment, however, is lacking to date.
As a result, RQ2: What are the resources and capabilities associated with successful PES execution in small businesses?
2. PES in adverse conditions. A second research gap lies with the inconclusive results with regards to the effect of mimetic pressures. To date, most of the literature has viewed proactive environmental strategies as a response to institutional pressures for more attention to the environment to which companies should conform. The slow and limited growth of organic farming, the slow and marginal investment of car manufacturers in reducing car CO2 emissions and many more examples, however, are
evidence that proactive environmental strategies are still meeting considerable institutional inertia (Hoffman & Ventresca, 1999). Either this evidence should lead to the questioning of institutional theory, or the depiction of the institutional pressures is skewed. I argue that besides coercive and normative pressures present, most businesses encounter pressures which run counter to these societal forces and which are interested in a status-quo with a predominant focus on profits, exempt from the costs that environmental regulation or internalization would incur. Few contributions, however, have looked at how firms can realize a PES when the institutional conditions are against having one in the first place. As was mentioned before, these conditions are likely to be present especially in the institutional environment of small firms. As a result,
Although chances are high that other research gaps are hidden in the literature review, this dissertation is dedicated to increasing the knowledge about the three research questions that were mentioned.
3.6. Overview of chapters addressing the research questions The remainder of this dissertation presents three studies that aim to answers the research questions as presented above. In order to guide the writer through this process, Table
3.4 provides an overview of the research questions and methods used to answer them in the corresponding chapters. First, chapter 4 draws on a literature review to assess the impact of firm size on small business social responsibility, thereby including PES. Second, the focus of chapter 6 research question 2. By drawing upon a multi-case study in the Belgian ornamental horticulture sector, the methodology and context description of which is laid out in chapter 5, a set of capabilities are defined that helped small businesses in this context to realize proactive environmental strategies. Given that the particular context of the Belgian ornamental horticulture are against having such a PES, the findings of chapter 6 also provide an answer to research question 3. However, given that we found a number of theoretical inconsistencies in the institutional theory literature on how PES as an act of institutional non-conformity was possible among small firms, chapter 7 further analyses the results of chapter 6 within the context of institutional non-conformity.
Investigating the Impact of Firm Size on Small Business Social Responsibility2 Abstract The impact of smaller firm size on corporate social responsibility is ambiguous. Some contend that small businesses are socially responsible by nature, while others argue that a smaller firm size imposes barriers on small firms that constrain their ability to take responsible action. This paper critically analyzes recent theoretical and empirical contributions on the size – social responsibility relationship among small businesses. More
specifically, it reviews the impact of firm size on four antecedents of business behaviour:
issue characteristics, personal characteristics, organizational characteristics and context characteristics. It concludes that the small business context does impose barriers on social responsibility taking, but that the impact of the smaller firm size on social responsibility should be nuanced depending on a number of conditions. From a critical analysis of these conditions, opportunities for small businesses and their constituents to overcome the constraining barriers are suggested.
This chapter was published as “Lepoutre, J. & Heene, A. 2006. Investigating the impact of firm size on small business social responsibility: A critical review. Journal of Business Ethics, 67(3): 257-273.” It was presented in an earlier version at the EABIS Conference on Small and Medium Sized Enterprises and Corporate Social Responsibility: Identifying the knowledge gaps, 15-16 December 2005, Durham Business School, UK.We wish to thank the participants of this conference, Bart Nooteboom, Mirjam Knockaert, Annick Willem, Geoff Moore, Laura Spence and two anonymous reviewers for their helpful comments and suggestions to improve this paper.
The Policy Research Centre for Sustainable Agriculture is gratefully acknowledged for the opportunity to carry out this research.