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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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5.3.5.3. External institutional environment DiMaggio and Powell defined an organizational field as a set of organizations that “in the aggregate, constitute a recognized area of institutional life: key suppliers, resource and product consumers, regulatory agencies, and other organizations that produce similar services or products.” (1983:148). Organizations in an organizational field share unilateral or multilateral influences that guide their behaviour through regulative (formal rules), normative (social obligations) or cognitive (taken-for-granted assumptions and behaviours) pressures (Scott, 2001) and which centre around a particular issue (Hoffman, 1999). Both Scott and DiMaggio and Powell warn anyone interested in investigating an organizational field that “the structure of an organizational field cannot be determined a priori but must be defined on the basis of empirical investigation.”(DiMaggio & Powell, 1983: 148). More specifically, it is important to assess how the organizational field is structured around one particular issue through each of these three “pillars” of institutional order (Scott, 2001). To this purpose, Table 5.9 provides a summary of the institutional pressures with regards to environmentally friendly “green” production in the Belgian ornamental horticulture sector. In contrast to earlier studies on organizational reactions to natural environmental issues (Henriques & Sadorsky, 1996; Henriques & Sadorsky, 1999; Buysse & Verbeke, 2003; Bansal, 2005), proactive environmental strategies in the Belgian ornamental horticulture industry represent an act of non-conformity, rather than one of conformity. More specifically, we found that the dominant institutional logic in the ornamental horticulture sector discourages proactive environmental strategies, and acts in favour of maintaining the status quo. Table 5.9 shows how the institutional pressures are distributed in favour of and against environmental strategies in the Belgian ornamental horticulture sector by drawing upon the three pillars of institutions: regulative, normative and cognitive.

1. Regulative pressures. Since we are looking at environmental practices that go beyond legal requirements (Sharma & Vredenburg, 1998; Aragon-Correa & Sharma, 2003),

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regulative pressures are only of interest as far as they inform firms to go beyond them.

As such, the growing trend of environmental regulatory requirements could act as an implicit regulative pressure for firms to go beyond current legal expectations and anticipate future ones. However, it conflicts with the explicit regulatory requirements that exported plants should be pest-free when they are sold for export. As such, the use of pesticides on exported plants is essentially required by law.

2. Normative pressures. Whereas it is generally expected that firms are under normative social and market pressure to improve their environmental performance, this does not seem to be the case in the ornamental horticulture sector. On the one hand, individual neighbours, civil society organizations and end-consumers display little interest in ornamental horticulture firms and complaints are therefore rare. On the other hand, the conservative and reactive discourse of professional associations conveys normative messages that discourage green production. Like most agricultural sectors around the globe, the ornamental horticulture sector is embedded in a highly institutionalized environment, with strong forces for within-industry isomorphism and resistance to external pressures (Coleman, 1998; Montpetit, 2000). Given that environmental regulation increasingly constrains the discretion growers have in their regular use of fertilizer and crop protection products, the general feeling is that the government is making it impossible to have a profitable business. The professional associations thus react by stating that environmental regulation is too fast and that it does not take the economic reality of growers into account.

“Give the sector the space where firms can further expand. This is our most important priority, and it shouldn’t be immersed in an amalgam of concurrent priorities for sustainability, optimal energy use, registration systems, … An owner-manager first has to be able to start a company, before he can speak about sustainable production, or before optimizing pesticides, nutrients and energy.” (professional association representative, 2003) Such resistance exists among individual firms as well, and in particular with regards to initiatives like VMS. Since VMS discloses the use of pesticides and fertilizers, some growers worry that this would encourage the government to establish new laws and

requirements. For example, one grower told me:

I get criticized sometimes and then other people tell me “you just disclose all those things! They [the government] don’t have to know all that. You just show it to them and next thing you know they’ll be putting taxes on that!”. (Ensor) Chapter 5 In addition, many firms are relying on independent advisors that guide the production, who are paid first and foremost to secure the quality and maximize yields. As a result, environmental criteria are rarely on their radar screen and advice is thus rarely given in these terms.

“If there are products available in Belgium that are not on the VMS list, then I’ll say: “guys, go ahead and take those products, please, what is the problem!” VMS is not going to determine your profitability, right?” (K5)





3. Cognitive pressures. Given the increasingly hostile environment and the few new entrants in the sector, the remaining firms rely on traditional practices that evade the risk and uncertainty of new techniques and technologies. For example, the traditional production methods favour a system of “calendar spraying”, which involves the preventive application of pesticides not based on necessity, but based on predefined calendar planning. It is generally accepted in the sector that doing otherwise would unnecessarily increase the risk of having plant damage. Even with the capital subsidies that favour environmentally friendly production methods, the additional (perceived) costs and risks that are associated with environmentally friendly production techniques or investing in more environmentally friendly technologies are attributed a low

priority in the growers’ decisions making:

“Growers work according to a system of preventive calendar spraying.(…) Among ornamental horticulture growers, it [guided protection] still encounters a lot of resistance. They don’t know what it’s about, their knowledge of parasites is inadequate, they fear the system will be too expensive because it is rather labor intensive.” (government official) One other typical characteristic for the Belgian ornamental horticulture is the strong individualism of growers. Whereas collaboration between firms and their various constituencies is very common in the Netherlands, the Belgian owner-manager wants to remain in charge of his own operations and is very reluctant to let anyone intervene.

“Some policy makers are dreaming of industrial clusters like the Dutch model, where a number of facilities are shared. But the Flemish grower wants a piece of land with his own company on it and a shed around it. That is his territory where he makes a living.” (professional association representative)

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In sum, these institutional pressures show how the organizational field is not in favour of environmental strategies that go beyond legal requirements. Table 5.9 summarizes these institutional pressures with illustrations from the data.

A proof of the institutional inertia that exists with regards to green production in the Belgian ornamental horticulture sector is the limited membership of VMS. Only 127 growers were members of this organization at the time of the interviews, amounting to only 6% of the entire sector (MPS, 2006). This limited membership shows that neither proactive environmental strategies, nor disclosure about organizational impact on the environment has become institutionalized in the sector. As such, VMS can be considered to have achieved the level of a “proto-institution”: new practices, rules and technologies that question the dominant institutional logics in an industry, but have not been diffused sufficiently to become institutionalized (Lawrence, Hardy, & Phillips, 2002).

5.4. Conclusion The objective of this chapter was to provide a comprehensive overview of methodological and contextual choices that were made in this dissertation. The striking conclusion that can be drawn from the contextual analysis is that neither of the factors that were reviewed in chapter 3 and that predicted the adoption of PES are present in the Belgian ornamental horticulture. As a result, it should come at no surprise that so few firms have become member of VMS. Whereas VMS has the potential to change some of the rules in the industry, the current institutional and general business environment is in fact more against than in favour of its principles. This has important implications for the analyses that will follow in chapters 6 and 7. First, a comparison between firms with higher VMS scores and firms with lower VMS scores will allow determining whether particular resources and capabilities facilitate small firms to realize proactive environmental strategies. Second, the very presence of firms that have become member of VMS already presents an anomaly to some of the theoretical predictions in chapter 3. Although it has mostly been suggested that small firm size inhibits proactive environmental strategies, the high performing VMS firms clearly demonstrate that this is nevertheless possible. Furthermore, these same firms realize these strategies, despite the institutional and general business conditions that were set against having one. As such, the Belgian ornamental horticulture, and in particular VMS members, presents an appropriate setting to do the research needed for answering research questions 2 and 3 of this dissertation.

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Abstract While the literature finds that small businesses have positive attitudes towards the natural environment, proactive environmental strategies are rarely found among them. Although contributions embedded in the resource-based view of the firm have therefore related the realization of proactive environmental strategies with larger firm size, anecdotal evidence of small firms that have realized their proactive environmental intentions nevertheless exist.

Using case study data of 8 small businesses, we develop a model that explains this theoretical inconsistency by identifying “organicity” and “munification” as two composite and interacting dynamic capabilities that enable small businesses to create the conditions that foster the realization of proactive environmental strategies.

This paper is the product of a collaborative effort of myself and Dr. Michael Valente. Earlier versions of this paper were published as “Lepoutre. J. and Valente, M. 2007. Overcoming Calimero Complexes in Small Business Social Responsibility. Proceedings of the conference of the International Association for Business in Society, May 1-June 3, 2007, Florence, Italy”, and presented as “Lepoutre, J. and Valente, M. 2007. A resourcebased perspective on small business proactive social and environmental strategies.” at the Ivey School of Business Research Seminar Series 2007-2008, 1 November 2007, Ivey School of Business, London, Ontario, Canada. The authors wish to thank Aimé Heene, Erik Mathijs, Bart Nooteboom, Johan Lambrecht, Annick Willem, Tima Bansal, Oana Branzei, Eileen Fisher, Jessica De Boeck, the anonymous reviewers and participants of the IABS conference and the participants of the Ivey School of Business Research Seminar Series for their helpful comments in improving this paper.

Chapter 6

6. Against All Odds: Realizing Proactive Environmental Strategies in Small Businesses



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