«PROACTIVE ENVIRONMENTAL STRATEGIES IN SMALL BUSINESSES: RESOURCES, INSTITUTIONS AND DYNAMIC CAPABILITIES Jan Lepoutre Promotor: Prof. Dr. Aimé Heene ...»
Schaper, 2002; Hitchens et al., 2005; Bansal, 2005; Worthington & Patton, 2005; McKeiver & Gadenne, 2005). The recurring explanation for such a lack of PES among small businesses seems to be that small businesses are unable to realize PES because of a lack of internal resource capital and external facilitating factors from the general business environment and society. First, small businesses lack the internal resource capital. Several studies have demonstrated that owner-managers succumb to the pressures of their everyday survival and lose their good intentions somewhere along the way (Tilley, 1999; Schaper, 2002; Vernon et al., 2003; Hitchens et al., 2005; Revell & Blackburn, 2007). More specifically, the lack of available time, knowledge, (financial) resources and power in the firm seem to be the most important inhibitors of PES in small businesses (Tilley, 1999; Tilley, 2000; Hillary, 2000a;
Observatory of European SMEs, 2002; Lepoutre & Heene, 2006; Elsayed, 2006; Revell & Blackburn, 2007). The abundance of resources in excess of what is needed in the firm – slack resources (Bourgeois, 1981; Sharfman et al., 1988) – has been identified as an important predictor of PES (Sharma, 2000; Bowen, 2000; Bansal, 2005), but are usually not available in smaller firms (Sharfman et al., 1988). As a result, a small firm constrained by a lack of slack resources will have shorter time horizons (Van der Stede, 2000) and will typically be “firefighting” problems that require immediate solutions to maintain firm survival. As a result, small business owner-managers argue that little time remains to think about appropriate environmental strategies (Revell & Blackburn, 2007). Furthermore, it is said that small business owner-managers lack “eco-literacy”, the knowledge to absorb and identify potential environmental practices for their firm (Tilley, 2000; Gerstenfeld & Roberts, 2000).
Sometimes this may even make them “vulnerably compliant”: due to a lack of awareness and empathy with environmental regulations, non-compliance is often more a result of bad luck than bad intentions (Petts et al., 1999).
Second, small businesses lack a supportive market environment for PES. Small business owner-managers frequently lament the lack of market incentives that would compensate the financial burden PES would place on their firm (Merritt, 1998; Tilley, 1999;
Ludevid Anglada, 2000; Gerstenfeld & Roberts, 2000; Hillary, 2000a; Observatory of European SMEs, 2002; Hitchens et al., 2005; Revell & Blackburn, 2007). Small business often lack the clout to impose their intentions on the very supply chain partners on whom they depend, or to lobby with the government for new regulatory requirements (Hillman & Hitt, 1999; Revell & Blackburn, 2007). Since tackling environmental pollution is often a systemic and shared responsibility in the supply chain, small firms depend on the willingness of their
constituents to go along in their intentions (Spence et al., 2000). In addition, given that many small businesses already operate in uncertain and complex environments (Chen & Hambrick, 1995; Merz & Sauber, 1995; Stone & Brush, 1996), they are hesitant to take up the additional uncertainty that comes with considering the natural environment (Lewis & Harvey, 2001).
Third, small businesses lack the institutional support for PES. Small businesses rarely attract the same levels of scrutiny from stakeholders as larger firms (Greening & Gray, 1994;
Meznar & Nigh, 1995; Bansal, 2005) and often do not receive any institutional pressures that drive them towards PES. Although the cumulative impact of small businesses on the environment is estimated to be higher than that of larger businesses (Hillary, 2000a), small business owner-managers and stakeholders alike consider the individual small business impact negligible (Merritt, 1998; Revell & Blackburn, 2007). Small firms may thus remain invisible to public scrutiny and only experience institutional pressure through legislation (Worthington & Patton, 2005; McKeiver & Gadenne, 2005). As a result, the adoption of environmental initiatives beyond legal expectations is more the result of a sense of environmental responsibility, than it is for reasons of competitiveness or legitimacy (Bansal & Roth, 2000).
Taken together, these theoretical and empirical findings predict that finding realized PES in small firms is highly unlikely, even when the intentions to have them are there. A number of case studies, however, offer the contrasting perspective that PES are not impossible in smaller firms. In fact, in some instances, small businesses have championed PES well ahead of larger firms in their industry (BITC, 2002; UNIDO, 2002; European Commission, 2003c; Jenkins, 2006). What remains unexplored, however, is how such businesses were able to realize their strategies, while the majority of firms were not.
One explanation could be that these anecdotal firms did not have any of these constraints and that Mintzberg and Water’s three conditions for deliberate strategies were met as a result. The descriptive accounts of the PES champions in these studies, however, mention that these firms did experience constraints. Yet the firms “did not see them as an obstacle, merely a challenge to be overcome” (Jenkins, 2006: 252). As a result, another explanation could be that the theoretical model as depicted in Figure 6.2 needs to be adapted to the specific context of small businesses. It has been argued before that “small businesses are not little big businesses” (Dandridge, 1979; Welsh & White, 1981) and that theories in large businesses will not necessarily apply to small businesses (d'Amboise & Muldowney, 1988).
However, in a recent study on PES in small businesses, Aragon-Correa et al. (2008) took a number of capabilities that were found in larger firms and tested them among small
businesses, and found that very similar capabilities were needed in small firms and in large firms to successfully execute a PES. In sum, perhaps as a result of a general neglect of small businesses in the organizations and the natural environment literature (Worthington & Patton, 2005; Clemens, 2006; Lepoutre & Heene, 2006; Revell & Blackburn, 2007), the current literature does not provide convincing theoretical perspectives to explain the phenomenon of small businesses successfully realizing seemingly elusive proactive environmental strategies.
This observation, together with the idiosyncratic challenges to empirically capture strategies in small businesses, led us to the inductive approach used in this study.
6.4. Methods This article draws on a qualitative multi-case inductive study in the tradition of theory elaboration (Lee et al., 1999), the purpose of which is to extend existing theory by contrasting it with observed events or conflicting findings (Gilbert, 2005; Greenwood & Suddaby, 2006).
Although the reader is referred to chapter 5 for a full overview of the methodology used in this study, I will briefly reiterate the most important choices made and how they connect with the research question at hand in this paper.
The particular nature of our research question directed us to multiple case studies for two reasons. First, multi-case studies are an appropriate methodology for studies that have as their goal to build or elaborate theory when theory is absent or yields conflicting explanations (Eisenhardt, 1989a; Yin, 2003; Siggelkow, 2007), as in our case. In particular, case studies are appropriate when the research question involves a “why” or “how” question, such as “how can small businesses realize PES when the odds are against having one?” Second, the particular research context of small businesses yields little secondary sources which could be used to build theory from larger samples of qualitative data sources. In addition, many of the behaviors and choices are unconsciously hidden even to the owner-manager. Assessing why and how a small business develops a certain strategy can thus best be observed by assessing it through various angles (Curran & Blackburn, 2001).
We theoretically sampled firms among VMS members in the Belgian ornamental horticulture sector. Within the context of this paper, we used VMS membership as a proxy for a firm’s proactive environmental intentions. As described in chapter 5, we excluded firms from our analysis when VMS membership did not reflect a firm’s proactive environmental intentions. Furthermore, we used the independently assessed VMS score as a proxy for whether the firm’s intentions were actually realized or unrealized. Table 5.4 provides an overview of the firms that were used in the multi-case study.
Confining the research setting within the geographical and sector limits of the Belgian ornamental horticulture allows controlling for potential alternative influencing factors besides organizational capabilities and resources (Eisenhardt, 1989a). Furthermore, as reviewed in chapter 5, the Belgian ornamental horticulture sector presents a particularly interesting setting to investigate PES, since none of the factors that have been associated with finding PES among firms (see Figure 6.2) are present. For convenience, these conditions are summarized again in Table 6.2.
6.5. Findings In order to explain the theoretically aberrant finding that some small businesses in the Belgian ornamental horticulture sector were effectively realizing a proactive environmental strategy when the odds were against having one, we explored the differences between the higher and lower performing VMS firms. Foreshadowing our conclusions, we found that the higher performing firms were able to change their resource base and create a microenvironment that mimicked the conditions that normally foster a firm’s successful realization of a PES. As such, our findings contradict the assumption that small businesses merely accept their internally or externally imposed constraints. Rather, by leveraging the complex interaction between two dynamic capabilities, munification and organicity, they were able to create the theoretical conditions that foster the realization of proactive environmental intentions. Munification and organicity are dynamic capabilities, since they enable the firm to change their resource base and to adapt their organization the dynamic processes that realizing a PES may present (Teece et al., 1997; Eisenhardt & Martin, 2000). In the following sections
we will first describe each of these dynamic capabilities and then develop how their interactive effect enabled firms to realize their proactive environmental strategies.
6.5.1. Munification Despite the lack of a generally munificent and institutionally supportive environment, the high scoring VMS members had been engaged in a set of activities that, together, had resulted in a micro-environment that was more conducive to higher VMS scores. The capability through which this was possible, and which we have come to call “munification”, involved the development, exploration and exploitation of an organizational environment from which necessary resource and institutional capital could be derived. This high level umbrella construct encapsulated a set of three underlying themes that together composed the building blocks of munification: (1) “building and attracting networks rich with complementary resources and capabilities”, (2) “collaborating for the joint development of lacking resources and knowledge”, and (3) “institutional agency”. Table 6.3 and Table 6.4 show how we coded these underlying themes in the data and how they varied across the sample firms.
Building and attracting networks rich with complementary resources and capabilities. The success of small businesses has often been associated with the ability to tap into the resources and capabilities that exist in their networks (Donckels & Lambrecht, 1997;
Davidsson & Honig, 2003; Greve & Salaff, 2003; Nooteboom, 2004). Yet one constraint that all firms in our sample experienced was that the traditional networks in the ornamental horticulture sector were inadequate to find the necessary means and institutional support to increase their environmental performance. For example, in order to get advice on which products to spray against certain pests, Jordaens relied on his local chemicals vendor. Given the little awareness of VMS requirements among his suppliers and advisors, however, he felt
he did not get the proper advice: