«PROACTIVE ENVIRONMENTAL STRATEGIES IN SMALL BUSINESSES: RESOURCES, INSTITUTIONS AND DYNAMIC CAPABILITIES Jan Lepoutre Promotor: Prof. Dr. Aimé Heene ...»
That’s been quite a learning path. The first years, I was like… we have to spray as little as possible. But in the end that was at the expense of the quality. Because you do get infections from some insects, if you spray too little or intervene too little, you get damage. It’s been a learning path and now the last five years after an almost integrated production, I know what’s possible and what’s not. (owner/manager Magritte) It appears that this focused adaptability increased the internal resource capital because they saw more applications for the resources that were available both within and outside the firm. As such, the presence of focused adaptability also increased the value of munification: it acted as an increased “absorptive capacity” (Cohen & Levinthal, 1990; Zahra & George,
2002) to detect opportunities in their network and the applicability of products derived from it.
Disciplined scrutiny. A consistent finding across our cases was also that, although the higher performing businesses developed broad levels of slack and adaptability, they were very punctual and strict in monitoring the dynamics of the firm and its environment. Flexibility was complemented with disciplined scrutiny to prevent the flexible form to turn into a chaotic form (Volberda, 1996). This finding is in line with some of the more pessimistic views on organizational slack that too much resources may result in managerial complacency, inefficiency and the pursuit of bad projects because of politics or lack of discernment (Bourgeois, 1981; Jensen, 1986). In addition, it resonates with the notion in entrepreneurship that risk-taking is not equivalent to foolhardiness (Schumpeter, 1934; Mintzberg & Waters, 1982; Timmons & Spinelli, 2004). Rather, entrepreneurs tend to follow a “test-the-water” approach, always sensing an environment with minor probes before plunging in” (Mintzberg & Waters, 1982: 495).
The disciplined scrutiny was thus manifested as a frequent analysis of organizational performance, the strict follow-up of what was going on in the firm, but also the careful assessment and comparison of opinions that were drawn from their network. The ownermanagers of Fabre, for example, organized weekly reflection moments, another deliberate moment of slack time, to check on the past week and seek ways to improve on a matter of
topics, including environmental issues:
“In the past, I had to be very strict about [VMS], because I knew that they were going to come and check us. Now I don’t have to do that anymore. They [the personnel] think it is so useful, that they will say “show us” [the VMS-score] and then we try to think about ways to improve and set goals for the next year. We meet every Friday, drink a beer or two and then we’ll go over everything that has happened during the week, what has gone wrong and what the plans are for the next week. That’s very good. And fun. I don’t know any other firm where they do this. We’ve been doing this for years! (…) We already did the weekly meetings, but it’s MPS that has made them more conscious about the products we use.” (o/m Fabre) Also, although most firms had advisors, the higher performing firms were more prudent in following their advice. Since advisors were paid in the first place to maximize yield and plant quality, they were not always inclined to give advice on the risky methods of using less fertilizer and pesticides. Ensor, for example, considered his advisor “A second opinion on your business. It’s still me that has to do it.” In contrast, Van Dyck argued “It’s not my job to say “you have to spray with this or that”. They [advisors] know perfectly with what product you can spray against funguses, against pests, against insects. They have to present us the environmentally friendly products.” (o/m Van Dyck) Besides its role in scrutinizing and monitoring the firm and its environment, disciplined scrutiny created confidence and additional resources in its own way as well.
Careful control and monitoring of the firm increased the knowledge about the firm and decreased the likelihood of having to jump from one problem to another. As such, there was more room for strategic assessment of the firm’s challenges and opportunities. As Ensor’s
owner-manager put it:
“It’s the same as in school. Why is one better than the other? You have to do your homework and you have to do good exams. Otherwise you don’t get your degree. So if you’re not disciplined as a grower and don’t monitor and assess everything carefully… (…) If you just say “we’ll see, maybe next week…” Well yeah, that’s how it [problems in the firm] starts. You have to be really disciplined. That’s what you see in all top firms, they’re all very disciplined. It’s because you’re disciplined that you have better quality, better sales and more room to do whatever.”(o/m Ensor)
As our data shows, the disciplined scrutiny allowed the firm to increase time and knowledge in the firm, and be more aware of the value of how to dedicate its resources and time to munification and the improvement of VMS performance.
In sum, we found that the combined subconstructs of “bootstrapping”, “focused adaptability” and “disciplined scrutiny” allowed the higher performing firms to build up the internal resources that fostered the realization of their proactive environmental intentions. The data also showed how each subtheme complemented the other two in making the firm organic. For example, the focused adaptability allowed the cognitive stretch that was needed to engage in the bootstrapping of internal resources and rethink responsibilities within the firm. The disciplined scrutiny, in turn, resulted in the monitoring that was shown to be key for the owner-managers confidence to leave the firm in the hands of his employees and helped to identify the necessary and appropriate complementary capabilities and resources in the
external environment. As a result, we propose:
Proposition 2: Organizations that are able to increase their internal resource capital through the interdependent capability of bootstrapping, focused adaptability and disciplined scrutiny will be more able to achieve their intended proactive environmental strategies than those that do not.
6.5.3. Interaction effects Throughout the analysis of both the organicity and the munification constructs, it was clear that the higher performing firms were proficient in both capabilities while the lower performing firms were not. Given that the specific context predicted low presence of internal resource capital, external resource capital and institutional capital, one could expect that a concerted effort was needed on all three aspects to create the appropriate conditions for proactive environmental strategies. Yet, emerging from our data, we found that the presence of organicity had a positive effect on the effectiveness of munification in creating external resource and institutional capital. Similarly, we found that the presence of external resource capital had a positive effect on the effectiveness of organicity in creating internal resource capital. We explore these interaction effects in more detail below.
We have mentioned several instances where the effectiveness of munification capabilities hinged on the presence of organicity. The firm was able to leverage its munification abilities when it was flexible enough to dedicate managerial time and resources
to its development, and remained prudent in how its precious resources were dedicated in this process. In addition, the critical scrutinizing of the resources and knowledge that could be derived from the environment, along with the flexibility to absorb them in the firm made the environment itself a more interesting source of opportunities and ideas. Similarly, the creativity and institutional detachment of the higher performing firms to envision alternative institutional spaces greatly increased the effectiveness of institutional agency in creating
institutional capital. Therefore, we propose:
Proposition 3a: A firm will be more effective in leveraging its munification capabilities for the creation of external resource capital when it also possesses organicity capabilities.
Proposition 3b: A firm will be more effective in leveraging its munification capabilities for the creation of external institutional capital when it also possesses organicity capabilities.
As far as the influence of external resources on organicity is concerned, we see at least two effects. First, external resources create possibilities for developing externalized versions of slack. Earlier studies have hinted at the interplay between munificence in the environment of an organization and organizational slack (Bourgeois & Singh, 1983; Dess & Beard, 1984).
In fact, Bourgeois and Singh (1983) conceptualized organizational slack as consisting of both internal as well as external sources. The latter type of slack, which they called “potential slack”, was defined as “the capacity of the organization to generate extra resources from the environment” (Bourgeois & Singh, 1983: 43). As such, munification itself can become a source of bootstrapping, in the sense that it invests in the creation of such potential slack resources in the external environment to maintain flexibility and adaptability (Boons & Berends, 2001). A good example in our data was the firm’s reliance on external advisors.
Given that these advisors visited many firms, they acted as a source of “outsourced networking”. The knowledge that this advisor could acquire by visiting many firms was a valuable source of slack to individual firms as well. Second, a firm will be more able to use its ability to harness multiple perspectives and to assess potential alternatives when there are more perspectives and alternatives to consider. For example, it was only because a government consultant with integrated production experience existed, that Magritte was able to consider involving him in his production. The more diverse a firm’s network becomes in terms of valuable resources and knowledge that the firm can tap into (Van Wijk, Van Den Bosch, & Volberda, 2003; Rodan & Galunic, 2004), the more it can be expected it will cognitively detach from taken-for-granted assumptions and behaviors (Brown & Duguid,
1991) and create more value in the firm’s internal resource capital (Zaheer & Bell, 2005). We
Proposition 3c: The greater the external resource capital of the firm, the more effective a firm will be in leveraging its organicity capabilities for the creation of internal resource capital.
6.6. Discussion We began our paper by noting that many small businesses experience difficulty in enacting their proactive environmental strategies. More specifically, despite their generally positive attitude towards environmental strategies, small businesses point to the lack of internal resource capital and lower levels of external resource and institutional capital both in general and in support of PES to explain the generally low penetration of environmental strategies (Merritt, 1998; Petts et al., 1999; Tilley, 2000; Gerstenfeld & Roberts, 2000;