«PROACTIVE ENVIRONMENTAL STRATEGIES IN SMALL BUSINESSES: RESOURCES, INSTITUTIONS AND DYNAMIC CAPABILITIES Jan Lepoutre Promotor: Prof. Dr. Aimé Heene ...»
2. Second, the natural environment also results in social issues. As a consequence of the market failures, third parties can also experience costs or disadvantages because of an organization’s activities. Organizations can therefore encounter social resistance as a result of such negative effects, but may also be rewarded in the event they display sensitivity to these social demands.
3. Thirdly, the natural environment and its relation with businesses is currently undergoing a paradigmatic debate. Whereas organizational activities have been based on a worldview that sees the natural environment as a source of resources and a sink for waste external to the organization, this model is being questioned today. An alternative approach, based on the assumption that healthy businesses are only possible in a healthy natural environment, places organizations within the natural environment and gives businesses the responsibility to voluntarily care for the natural environment. Such a debate induces new questions for business and, hence, new strategic challenges.
Businesses can respond in multiple ways to these challenges. Where one possibility would be to respond reactively, and to only take the natural environment into account as far as this would be required legally, the focus of this dissertation was on those firms that were proactively taking the natural environment into account in their activities. Throughout this
dissertation, we used the following definition of PES as a beacon:
xviii Summary A proactive environmental strategy is the continuous process of resource building, selection and deployment for value creation and distribution, by navigating through and interacting with the structural and social conditions that influence their value, with the purpose to prevent negative effects, or create positive impacts on the natural environment, beyond what is legally required or accepted as standard practice.
After this conceptual delineation in chapter 2, chapter 3 synthesizes the current stateof-the-art of the PES literature around the antecedents and consequences of PES. In this process, four influencing factors emerged: internal motivators, external motivators, internal facilitators and external facilitators. While the motivating factors provide the impetus to proactive environmental strategies, the facilitators acted as reinforcing of inhibiting factors for their implementation or in realizing improved environmental and financial performance.
1. Internal motivators. The likelihood of finding PES in firms is higher when there is a sense of moral responsibility towards the natural environment in the firm, when there are opportunities from a competitiveness point of view, or when the firm wants to maintain its legitimacy in society.
2. External motivators. PES are also more likely to be found when the institutional context pushes firms towards more voluntary attention to the natural environment.
However, whereas some sources find that this institutional context is absolutely necessary, others find the opposite.
3. Internal facilitators. The big constant in the literature is the finding that the larger the firm, the higher the likelihood of finding a PES. In addition, the availability of slack resources, often associated with larger organizational size, also has a positive effect.
Other than that, a general strategic proactivity or international experience also play a role. Furthermore, the same factors also seem to impact the likelihood that a PES results in higher performance in economic and environmental terms. Theoretical closure is difficult, however, since for most general findings contradictory evidence can to be found.
4. External facilitators. Finally, the likelihood that an organization has a PES diminishes with lower munificence, and higher complexity and uncertainty of the business environment. On the other hand, these same circumstances are predicted to have a positive effect on the impact of PES on financial and economic performance.
In summary, the PES literature provides a similar conclusion as was promoted in the general strategy literature: in order to explain PES, it is necessary to simultaneously take the interaction between different motivators and facilitators into account. In order to contribute to
such a further refinement, this dissertation presents three studies that aim to uncover the interactions between the aforementioned factors in the specific context of small businesses, and which address the three research questions as mentioned above.
What is the impact of firm size on the adoption of PES in smaller firms?
One inconsistency that emerged from the literature review in chapter 3 was the impact of firm size on PES. While large studies consistently find a positive correlation between firm size and PES, a growing number of anecdotal and case studies contradict that relationship. We therefore further explored the relationship between firm size and the ability and willingness of small firm size to realize PES. De most important findings of this dissertation in this
perspective can be summarized in three points:
1. Small businesses are not principally against having a responsibility towards social issues. Rather, small firms simply do not recognize many social issues as a result of their limited visibility and (perceived) impact on the natural and social environment. Hence, small firms pay attention mostly to their internal stakeholders (employees) and the opinions of peers, and less to external stakeholders and the natural environment.
2. Besides limited recognition, it became clear that it is especially the implementation of proactive social and environmental strategies that is difficult for many small firms. For most small firms, proactive environmental strategies remain good intentions as a result of a lack of time, knowledge, financial resources and power. Some firms nevertheless seem to succeed, especially when firms possess the capabilities that can reduce these constraints (see research question 2)
3. Small businesses, more than large firms, depend upon their environment to implement realize PES. A culture of shared responsibility, and an institutional and business environment that supports PES seems to be particularly important in this perspective. The findings in this dissertation show, however, that small firms can employ certain dynamic capabilities to also influence their immediate environment (see research question 2 about how this was possible).
xx Summary What are the resources and capabilities associated with successful PES execution in small businesses?
The empirical research in this dissertation is an embedded in-depth case study research that was done among eight firms in the Belgian ornamental horticulture. An extensive methodological and contextual justification of this empirical study in chapter 5 demonstrated that firms that are member of VMS (Vlaams Milieuplan Sierteelt – Flemish Environmental Plan Ornamental Horticulture) have the intention to realize a PES despite a general lack of internal and external resources and institutional support. By comparing firms with high and low VMS scores, which signal whether a firm was capable of realizing its proactive environmental intentions or not, chapter 6 demonstrates that a successful realization of the firm’s environmental intentions depended on the ability of the firm to create a microenvironment for the firm that mimicked the theoretical conditions favouring PES. More specifically, we identified “munification” and “organicity” as the two interacting and composite dynamic capabilities that enabled the firm to change its internal and external resource base.
In addition, we also found that both dynamic capabilities interacted with each other and further reinforced the potential of the firm to realize its objectives. The presence of organicity increased the effectiveness of munification in the firm, while the external resource conditions further increased the effectiveness of organicity in building internal resource capital.
How can small business be successful in PES when the (institutional) conditions are against having one?
Given that organicity and munification helped the firm to realize its proactive environmental intentions when not only the institutional but all conditions were set against having one, chapter 6 helped to explain the third research question as well. Yet one striking observation in chapter 6 was that the firm’s PES went against institutionalized practices and prescriptions in their industry. Whereas PES are generally seen as an act of conforming to institutional pressures, the dominant institutional pressures in our study were strongly discouraging PES. As a result, achieving high VMS scores reflected an act of institutional non-conformity. Since current explanations in institutional theory offer contradictory explanations about how institutional non-conformity was possible in the small firms of our study, we therefore further explored how the capabilities as identified in chapter 6 helped to explain institutional non-conformity in small business contexts. As such, chapter 7 took an institutional theoretical lens to zoom in on how small businesses can be successful in PES when the institutional conditions were against having one. In this process, three factors
predicted successful institutional non-conformity:
1. Firstly, the successful firms’ particular network characteristics lowered their embeddness in the organizational field. By assuming multiple roles within the organizational field and by being exposed alternative institutional logics they were able to detach from institutionalized prescriptions in the Belgian ornamental horticulture sector.
2. Second, whereas successful firms theorized the institutional non-conformity as an envisioned future, the unsuccessful firms saw the institutional non-conformity as an inevitable future or a potential trend. Importantly, the cognitive approach of the institutional non-conformity as a desired future resulted in flexibility to adopt alternative solutions to persistently realize their aspirations.
3. Third, the successful firms seemed “immune” to the negative effects other firms would experience with institutional non-conformity. By drawing upon a business model that was not only deviating with regards to the PES, but was non-conforming in different perspectives and in a way that was conducive to realizing a PES, they became insensitive to the uncertainty and legitimacy risks that other firms perceived.
xxii Summary In conclusion Whereas most reports to date either describe how proactive environmental strategies can yield benefits to small firms, or in contrast how the small scale of small firms inhibits proactive environmental strategis among firms, this dissertation brings a more nuanced story.
Proactive environmental strategies are not easy for most small firms, but not impossible. The contribution of this dissertation lies in the description of how this process is manifested. In addition, the process was described in a context were none of the environmental conditions yielded a direct benefit for firms with PES. Given that many firms are in such a situation, or perceive they are, we hope that our insights can inspire other firms to also reduce their environmental impact.