«PROACTIVE ENVIRONMENTAL STRATEGIES IN SMALL BUSINESSES: RESOURCES, INSTITUTIONS AND DYNAMIC CAPABILITIES Jan Lepoutre Promotor: Prof. Dr. Aimé Heene ...»
Despite the interesting findings this literature has thus provided, it has tended to focus on larger enterprises only. However, as small and medium-sized businesses easily surpass larger businesses in demographic terms, economic value added and employment (Observatory of European SMEs, 2003), their inclusion in the quest for a sustainable natural environment is paramount. Although no exact figures seem to exist, the cumulative impact of smaller firms on the natural environment is estimated to be bigger than the cumulative impact of larger firms (Hillary, 2000a). This makes the lack of specific research on smaller firms all the more perplexing. In addition, several empirical phenomena indicate that an inquiry into the specifics of small business environmental strategy is needed. First, empirical studies on proactive environmental strategies have mostly found a positive relation between firm size and the extent to which firms adopt and successfully implement such strategies (AragonCorrea, 1998; Judge & Douglas, 1998; Observatory of European SMEs, 2002; Chan, 2005;
Bansal, 2005; Vives, 2006; Elsayed, 2006). Even if the same models apply in both small and large business contexts, such as recently found by Aragon-Correa and colleagues (2008), this empirical material invites a more detailed investigation into the reasons why they fail to be implemented among most small businesses. Second, the small business literature has
indicated before that large business models will not necessarily apply to smaller businesses (Dandridge, 1979; Welsh & White, 1981). A smaller firm size seems to impose specific constraints and challenges that restrain proactive environmental strategies. The research reviewed in this dissertation indicates that a lack of time, knowledge, (financial) resources and power are most commonly mentioned as barriers (Jenkins, 2004; Lepoutre & Heene, 2006;
Elsayed, 2006). Yet despite these constraints, there is ample anecdotal evidence of some very innovative and proactive small ventures around the globe (UNIDO, 2002; European Commission, 2003c), which are championing proactive environmental strategies even compared to larger businesses. Through “environmental entrepreneurship”, they have captured opportunities in environmental market failures, the exploitation of which alleviates the market failure and contributes to reducing the environmental degradation (Dean & McMullen, 2007). How small businesses overcome the constraints that discourage them to adopt PES and be successful in their implementation, however, is largely unexplored terrain and invites further research.
Given the dearth of theoretical development on small business proactive environmental strategies, this dissertation presents an empirical attempt to answering the question “how can small businesses successfully implement proactive environmental strategies?”
1.2. Structure of this thesis To provide the reader with a roadmap on the research covered in this book, this paragraph foreshadows the remaining chapters. In total, this dissertation consists of seven chapters which are structured in four parts. Figure 1.1 provides a visual overview of how the eight chapters are interrelated.
In Part I, containing the current chapter, I introduce the general research question that has guided me throughout this dissertation and present the empirical context in which the research was executed.
Part II, consisting of chapters 2 and 3, provides a theoretical background for the research in this dissertation. To this purpose, chapter 2 introduces the reader to a theoretical delineation of each of the semantic building blocks of “proactive environmental strategy in small business”. Next, the goal of chapter 3 is to develop specific research questions that are grounded in a state-of-the-art analysis of the general proactive environmental strategy literature. To this purpose, I first outline the methodology used in the review and then move to a thematic description of the antecedents and the consequences of PES that have been found
in the literature. Using my observations of remaining questions and research gaps, I then
formulate three research questions:
RQ1: What is the impact of firm size on the adoption of PES in smaller firms?
RQ2: What are the resources and capabilities associated with successful PES execution in small businesses?
RQ3: How can small business be successful in PES when the conditions are against having one?
Chapter 1 Part III, consisting of chapters 4, 5, 6 and 7, represents the main body of this dissertation, as each chapter represents part of the exercise to provide answers to the aforementioned research questions. First, chapter 4 draws on an extensive literature review to explore the inconsistent empirical findings on the relationship between small firm size and the adoption of proactive environmental strategies. Given the scarce literature on small business proactive environmental strategies, the literature review is expanded to a broader, yet still limited, literature of social responsibility (including the natural environment) in small businesses. Using a generic framework of contextual influences on businesses, the literature is then reviewed in four parts: (1) issue characteristics, (2) personal characteristics, (3) organizational characteristics, and (4) context characteristics. The chapter concludes with the idea that the smaller size does incur a number of constraints that inhibit smaller firms to engage in social responsibility strategies, yet that a number of conditions can mitigate these constraints. In particular, our review hinted at the potential of capabilities within and across the boundaries of the firm to bring a more dynamic perspective of small business proactive environmental strategies.
Next, the cluster of chapters 5, 6 and 7 takes the reader to the Belgian ornamental horticulture industry, where the empirical data of this dissertation were collected. To this purpose, chapter 5 first presents an overview of the research design, and the procedures that were followed in collecting and analyzing the data. Subsequently, the particular research setting of the Belgian ornamental horticulture sector is provided as a contextual introduction to chapters 6 and 7, which report the actual findings of two empirical studies on the same data set.
Chapter 6 builds further on the suggestion of chapter 4 to look at the capabilities that facilitate small businesses to engage in proactive environmental strategies, despite conditions that make a successful implementation of these strategies run “against all odds”. As such, it was designed to provide answers to research questions 2 and 3. After connecting the methodology as described in chapter 5 with the specific research question at hand, we describe munification and organicity as the two composite dynamic capabilities that explained the realization of PES in our firms. Subsequently, we discuss our findings and the implications for the resource-based perspectives that predict small size to be incompatible with PES.
Using the same empirical data, chapter 7 further explores an insight that emerged in chapter 6. Since all the firms in our sample had the intention to engage in proactive environmental strategies, they assumed a strategy that ran counter to the institutionalized
practices and expectation in their industry. Whereas proactive environmental strategies are generally perceived as conforming to institutional pressures, they were an act of nonconformity in the Belgian ornamental horticulture. Yet the current literature on institutional non-conformity is inconsistent in explaining how such processes can be possible in small businesses. After our explanation of this theoretical inconsistency and reiterating some methodological issues for the paper, we explore and discuss the underlying mechanisms that help to better understand how the successful institutional non-conformity came about in these firms. More specifically, our findings include (1) the interaction scope with the organizational field, (2) the cognitive approach towards institutional non-conformity, and (3) the organizational conduciveness to institutional non-conformity. Subsequently, we discuss the implications of our findings for institutional theory, the resource-based view of the firm and the organizations and the natural environment literature.
Finally, chapter 8, as the only chapter in part IV, presents the general conclusions of this dissertation. First, I discuss how the findings from part III contribute to answering the research questions as presented in chapter 3. Next, I discuss how the research design limits the extent to which our findings are transferrable to other contexts. In conclusion, I present some avenues for future research based on the new questions that this dissertation uncovered.
2. Proactive Environmental Strategies in Small Business: Definitions and Theoretical Framing
2.1. Introduction The surge of interest of business and strategy scholars in the natural environment followed the general growth of attention in sustainable development after the World Council for Economic Development published its famous report “Our Common Future” in 1987 (WCED, 1987). After decades of growing public debates on the negative social and environmental impacts of business, “Our Common Future” presented a landmark reflection and shift in thinking about business and society issues (Schmidheiny, 1992; Hart, 1995;
Gladwin et al., 1995; Shrivastava, 1995b). First, the Council formulated a definition that has become the standard citation in almost every work that has been written on sustainable
“Sustainable development is the development that meets the needs of the present without compromising the ability of future generation to meet their own needs.” (WCED, 1987: 43) Although this definition has been further scrutinized and debated (Gladwin et al., 1995), it made clear that if the world was to assume a guiding principle for the future, it should care for the prosperity of all people today (implying the eradication of hunger, poverty, illiteracy, etc), but also for generations to come (implying a care for nature and prudence on the use of resources). Second, “Our Common Future” was a moral call for a shared responsibility by everyone in society, including business. Although businesses were part of the problem, they were equally invited as partners in the process of finding a solution (Schmidheiny, 1992;
Bilimoria, Cooperrider, Kaczmarski, Khalsa, Srivastva, & Upadhayaya, 1995). Yet, Brundtland and her colleagues also warned that such a shared responsibility would involve
tough choices and trade-offs:
“In the end, sustainable development is not a fixed state of harmony, but rather a process of change in which the exploitation of resources, the direction of investments, the orientation of technical development, and institutional change are made consistent with future as well as present needs. We do not pretend that the process is easy or straightforward. Painful choices have to be made.”(WCED, 1987: 15) In order to tackle these changes, the Brundlandt report, as “Our Common Future” is often referred to, incited a number of new initiatives that brought businesses together to reflect on their impact on the environment. The World Business Council on Sustainable
Development, the UN Global Compact, the Caux Round Table and the Equator Principles are but some of the initiatives that have been taken in this perspective. In the academic world, several new journals (Journal of Cleaner Production, Business Strategy and the Environment, Journal of Industrial Ecology, Business & Society, Journal of Environmental Management, Organization & Environment, Business & Society, etc) and academic groups (the Social Issues in Management and the Organizations and the Natural Environment divisions in the Academy of Management, the Greening of Industry Network, etc) were founded or grew in membership, reflecting the specific new research that was deemed needed (Bansal & Gao, 2006; Etzion, 2007).