«PROACTIVE ENVIRONMENTAL STRATEGIES IN SMALL BUSINESSES: RESOURCES, INSTITUTIONS AND DYNAMIC CAPABILITIES Jan Lepoutre Promotor: Prof. Dr. Aimé Heene ...»
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 of 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.
Our findings uncovered three features that distinguished between successful and unsuccessful institutional non-conformity. First, 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. 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 nonconformity as a desired future resulted in flexibility to adopt alternative solutions to persistently realize their aspirations. 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 nonconforming 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.
8.2. Discussion of the findings To what extent do the findings in this dissertation invite a reconsideration of previously accepted perspectives? Besides the theoretical reflections and contributions that were already discussed in each of the previous chapters of part III, I believe the theoretical contribution of this dissertation can be summarized around three features.
1. Advancing PES research in small businesses requires a translation of PES in its underlying processes. Although it would be unwise to ignore the compelling and consistent positive correlation between firm size and PES, the research in this dissertation warrants caution with deterministic predictions stating that PES would be
impossible in small firms. In particular, the evidence from both our literature review and empirical studies invites researchers to not just copy large business perspectives to small business PES. In order to understand the ability and inability of small business PES, it is necessary to look under the hood of PES and uncover the underlying processes that inhibit small firms from adopting them. For example, we found evidence both in the literature (Merritt, 1998; Hillary, 2000a; Worthington & Patton, 2005; Revell & Blackburn, 2007) and in our own research that, in general, small businesses experience completely different institutional influences with regards to environmental issues. A large firm, as a result of its large absolute impact on the natural environment and its greater visibility, may receive normative institutional pressures from civil society that support a proactive reduction of the environmental impact of the firm. As a result, it is no surprise that PES induced the need for integrating stakeholder perspectives in the strategy of the firm (Hart, 1995; Sharma & Vredenburg, 1998). In contrast, our review in chapter 4 demonstrated that most small firms hardly recognize issues related to the natural environment as a result of their low visibility and (perceived) impact. As a result, normative pressures and opportunities are rarely received from the market or civil society. What we found in the literature, and especially in the research presented in chapters 6 and 7, is that firms may in fact experience within-industry conservative pressures that even discourages firms to stray away from the general industry approach to the natural environment. In our research, PES were thus manifested as underlying processes of institutional non-conformity, and therefore required different capabilities to tackle the challenges this presented. This conclusion is important, since it could inspire owner-managers, business associations and governments alike to redirect their attention from vague messages and “mythical” half-truths about the business case of PES (Porter & Kramer, 2006; Aragon-Correa & Rubio-Lopez, 2007) to the actual barriers and processes that small businesses experience for realizing their already present intentions. For example, governments could focus especially on ensuring that the most proactive firms within an industry can be successful in their PES. If the proactive firms are successful in their endeavours, they will act as bandwagons for both other small firms in the industry mimicking leading companies (Haveman, 1993a; Aldrich & Fiol, 1994), as well as large firms that interpret the success of small firms as a reduced uncertainty for their success (Terlaak & King, 2007). However, whereas many policy initiatives hope to instigate this mimetic behavior through conveying messages about the positive consequences of
PES, it may be more important to disclose best practices on the mitigation of constraints that small businesses may experience.
2. The need for combined outside-in and inside-out perspectives on proactive environmental strategies. Although my review of the strategy literature in chapter 1 advanced a view that combines both outside-in and inside-out perspectives to strategy, most of the literature on PES has focused on only one from either of these perspectives. For example, some have used only resource-based perspectives (Hart, 1995; Aragon-Correa, 1998; Sharma & Vredenburg, 1998; Sharma, 2000; Christmann, 2000), whereas others have only used an industrial organization (Porter & van der Linde, 1995a; Nehrt, 1996; Reinhardt, 1998) or institutional theory (King & Lenox, 2000; Clemens & Douglas, 2005) and stakeholder theory (Henriques & Sadorsky, 1996; Rugman & Verbeke, 1998; Henriques & Sadorsky, 1999; Buysse & Verbeke,
2003) lens. Only recently have studies begun to explore a combined inside-out and outside-in perspective on PES (Aragon-Correa & Sharma, 2003; Chan, 2005; Bansal, 2005; Sharma & Henriques, 2005). The findings in this dissertation further reconfirm the need to analyse PES from a combined inside-out and outside-in perspective, and most importantly, their interactive influence (Bansal, 2005). For example, both chapters 6 and 7 present findings that resonate well with resource-based and dynamic capability perspectives, since we found that the proficiency of firms to realize their PES depended on the dynamic capabilities they were able to develop and employ and change their resource-base according to their needs. The results in chapter 6 even demonstrated that these dynamic capabilities enabled the firm to change the external environment in such a way that it would mimic the characteristics necessary to foster their realization of PES. However, explaining how these dynamic capabilities worked required the integration of institutional theory and contingency perspectives. For example, the capabilities in the successful firms were also necessary because the environment was not conducive to the firms having a PES. As soon as the proactive environmental intentions met the contextual constraints of implementing them, the firms had to engage in the dynamic search for a fit between their aspirations, the environmental conditions and their organizational resource base. As a result, one of the conclusions of chapter 6 was that our findings reconfirmed the necessity of having the contingency factors in place that foster a PES. Taken together, both chapters 6 and 7 show how the internal and external resource-base of the firm and the institutional context interacted with each other to explain the ability of the firm to realize a PES. In
particular, chapter 7 showed how the resource base of the firm influenced the way the institutional context was experienced. The type of connections the firm had, its persistent commitment to an envisioned future, the resulting flexibility to incorporate emerging solutions, and the institutional immunity of the firm and its business model enabled it to ignore institutional boundaries other firms considered insurmountable. In sum, these findings reinforce the need for using an interactive institutional and resource-based perspective to understand PES (Bansal, 2005).
3. Obstinate commitment towards goals, flexible towards means. The view that small businesses lack the resources, time and knowledge to engage in PES is a somber one.
Yet, emerging in several places in this dissertation was a feature unique to many small businesses that acts in their favour. Small firm owner-managers have the unique potential to shape their organization according to their own visions and aspirations.
Since it is really their organization and since a small size allows substantial control of what happens inside it, small firms may have more potential to engage in the pathbreaking changes needed for reducing business impact on the environment. Whereas this is not a new finding (Gibb & Scott, 1985; Gibb, 2000; Curran & Blackburn, 2001), both chapters 6 and 7 shed light on the underlying processes that are involved.
Firms achieving excellence in realizing their PES – despite conditions discouraging this feat – were able to do so because they visualized PES as part of a desired future and were therefore committed to accomplishing their aspirations. Furthermore, this commitment to shape the world according to their own aspirations does not restrict itself to the boundaries of their organization. In fact, where the firm’s resources and sphere of influence end, and where the outside world begins, becomes a difficult question to answer. Rather, the firm integrates resources and solutions emerging from both inside and outside the firm to obstinately shape the world within its sphere of influence. Such a finding is important, as it should inform small businesses ownermanagers about how to manage the risk associated with the uncertainty of natural environmental issues. Indeed, it has been shown before that firms should be wary of proactive environmental strategies that reduce the resource flexibility of the firm (Rugman & Verbeke, 1998). Yet it is only by balancing commitment to strategic objectives with a flexibility to integrate and abandon emerging solutions in the shorter term that most firms are successful in realizing their objectives (Ghemawat & Del Sol, 1998). In particular, it requires the firm to adopt its business model to the institutional non-conformity and make it conducive to be institutionally non-conforming. Given
that business models consist of various interrelated domains, institutional nonconformity may therefore require deviating in other domains of the business model as well.
Together, the findings of this dissertation contribute to a better understanding of an underdeveloped domain of empirical inquiry: small business proactive environmental strategies. Given the formidable influence small businesses have on various domains of social life, and in particular on the natural environment, more fine-grained analyses of small firms are necessary to inform small business owner- managers, policy makers, professional associations and researchers alike on how small businesses can be better engaged in the quest for sustainable development.