The Interplay Between Private and Public Regulations: Evidence from ISO 14001 Adoption Among Chinese Firms

Extant studies on private regulation have not reached a sufficient understanding about the interplay between private and public regulations, due to underdeveloped theoretical framework and the lack of large-sample empirical investigations. Leveraging ISO 14001 adoption among Chinese firms as the research context, the current research draws on the institutional theory to examine how firm’s adoption of ISO 14001 standard, as a specific form of private regulation, affects the incidence of public environmental inspections. To test our arguments, we conduct two empirical studies. Study 1 uses the first-hand data of a corporate social responsibility survey on Chinese manufacturing firms, whereas Study 2 deploys the second-hand longitudinal archival data of the government environmental inspections on Chinese listed firms. Both of the two studies reveal consistent findings that ISO 14001 adoption decreases the incidence of government environmental inspections, and that the effect of ISO 14001 adoption becomes stronger in state-owned enterprises and firms with top management team’s political ties. Our findings are suggestive of a complementary relationship between private and public regulations, in a sense that private regulations can compensate for the weaknesses of public regulations by offering faster, more flexible and cost-efficient means of enforcement, which allows the public authorities to economize on the deployment of public resources to monitor the rest non-compliant firms.     

The Financial Impact of ISO 14001 Certification: Top-Line, Bottom-Line, or Both?

It is not easy being green, but it does beg the question: Does being green pay off on the bottom-line? Unfortunately, that question of becoming ISO 14001 to reap financial benefit remains widely unanswered. In particular, corporate practice is interested in how environmental management impacts firms’ finance through top-line impact, bottom-line impact, or both—as this paves the way for an investment of environmental management. As current findings are mixed, our study tracks financial performance of publicly traded US firms between 1996 and 2005 to test whether ISO 14001 leads to improved financial performance. Employing a rigorous event-study approach, we compare certified firms to different control groups based on several matching criteria that include industry, size, and/or ROA. In the short run, ISO 14001 certification makes only a minor impact on the bottom-line, according to our results. However, these same results show a significant financial improvement over the long haul with ISO 14001 certification. Additionally, this long-term improvement also makes a significant improvement in top-line performance. Thus, we conclude that environmental management pays off along both dimensions.     

Environmental management,nonmarket strategy,and firm performance in emerging markets: The case of ISO 14001

Firms use environmental management standards such as ISO 14001 to reduce the impact of business activity on the natural environment. Though these standards are widely celebrated on moral and ethical grounds, their implication for financial performance and competitiveness is equivocal. Drawing on neo-institutional theory, we conceptualize ISO 14001 as a nonmarket strategy and examine its impact on firm performance within the contexts of three highly polluted emerging markets – China, India, and Pakistan. Employing a rigorous event-study approach, we find that ISO 14001 certification has a negative impact on firms’ operating profitability and market value in both short and long runs. This negative impact appears to be stronger in contexts with weak institutions and poor environmental protection regimes. Further multivariate analyses show that the negative impact of ISO 14001 on firm performance is weaker among socially responsible firms and stronger among politically connected firms. These findings contribute to the environmental management literature. They also have practical implications for managers.     

Comparing Big Givers and Small Givers: Financial Correlates of Corporate Philanthropy

In a departure from the traditional studies of corporate philanthropy that focus on board composition, advertising, and social networks, the authors investigate the financial correlates of corporate philanthropy. The research design controls for firm size and industry while observing firms from a variety of industries. The sample contains matched pairs of generous and less generous corporate givers. The authors find, as hypothesized, a positive relationship between a firm's cash resources available and cash donations, but no significant relationship between corporate philanthropy and firm financial performance, regardless of whether corporate philanthropy is measured as cash payouts or the aggregate contributions that charities actually receive, and regardless of whether financial performance is gauged using accounting measures or market measures. Whereas the link between available resources and corporate philanthropy is well accepted in the literature on corporate social responsibility, it has been rarely tested and never so definitively found as in this research.     

What Drives Substantive Versus Symbolic Implementation of ISO 14001 in a Time of Economic Crisis? Insights from Greek Manufacturing Companies

This paper analyses the role of external pressures, internal motivations and their interplay, with the intention of identifying whether they drive substantive or instead symbolic implementation of ISO 14001. The context is one of economic crisis. We focus on Greece, where the economic crisis has weakened the country’s institutional environment, and analyse qualitatively new interview data from 45 ISO 14001 certified firms. Our findings show that (a) weak external pressures can lead to a symbolic implementation of ISO 14001, as firms can defend their legitimacy without incurring the costs of internalization in the local market; (b) weak external pressures can lead to substantive implementation of ISO 14001 when firms have strong internal motivations seeking to strategically differentiate from competitors in international markets. Firms internalize ISO 14001 so as to restore their legitimacy and reputation in foreign markets and stimulate their competitiveness; and (c) strong internal motivations pave the way for companies to stimulate their competitiveness by enhancing their efficiency, as some companies might strengthen their position in the local market by implementing ISO 14001 substantively. The contribution of this paper to the literature on ISO 14001 internalization lies in refining existing theory on the importance of internal motivations for the substantive implementation of ISO 14001 in the context of economic crisis. In addition, this paper extends current theory by challenging studies that dismiss the importance of external pressures. We argue that the intensity of external pressures influences the internalization of ISO 14001, but propose that this relationship might not be linear.     

The interplay of corporate social responsibility and corporate political activity in emerging markets: The role of strategic flexibility in non‐market strategies

Corporate social responsibility (CSR) and corporate political activities are complementary, and the coordinated management of corporate social responsibility and corporate political activities may lead to better firm performance. However, corporate social responsibility and corporate political activities should be aligned carefully to utilize this complementarity. Strategic flexibility, which is the ability of a firm to adapt to changes in the external environment and make necessary organizational modifications quickly, can help firms to align their corporate social responsibility and corporate political activities. This paper empirically investigates the political dimension and the interactive dimension which describes interactions between corporate social responsibility and corporate political activities together with strategic flexibility and their effects on firm performance through a study of 142 firms in Turkey using moderated multiple regression methods. The results show that, while the political dimension had an inverted U‐shaped effect on firm performance, indicating that only a moderate level of corporate political activities may improve financial performance, the interactive dimension had positive but limited implications for performance. Finally, it was found strategic flexibility plays a positive moderating role on the relationships between the interactive dimension and firm performance. It is concluded that complementarity between corporate social responsibility and corporate political activities which may result in better performance is contingent on strategic flexibility.     

The Impact of Forest Certification on Firm Financial Performance in Canada and the U.S.

The purpose of this article is to examine empirically the impact of environmental certification on firm financial performance (FP). The main question is whether there is a “green premium” for certified firms, and, if so, for what kind of certification. We analyze the short-run and the long-run stock price performance using an event-study methodology on a sample of Canadian and U.S. firms. The results of short-run event abnormal returns indicate that forest certification does not have any significant impact on firm FP regardless of the certification system carried out by firms. Unlike the short-run results, the long-run post-event abnormal returns suggest that forest certification has, on average, a negative impact on firm FP. However, the impact of forest certification on firm FP depends on who grants the certification, since only industry-led certification (Sustainable Forestry Initiative, Canadian Standards Association and ISO14001) are penalized by financial markets, whereas non-governmental organizations–led Forest Stewardship Council certification is not.     

Stakeholder Learning Dialogues: How to Preserve Ethical Responsibility in Networks

The shift in corporate strategy, from vertical integration to strategic alliances, has developed hand in hand with the evolution of organizational structure, from the vertically integrated firm to the network organization. The result has been the elimination of boundaries, more flexible organizations, and a greater interaction among individuals and organizations. On the negative side, the specialization of firms on single areas of competence has resulted in the disaggregation of the value chain and in the disaggregation of ethical and legal responsibility. To illustrate this point, the paper considers some cases, such as the case of the "beer girls" of Southeast Asia, who are used unethically by distributors to sell beer and liquor. To deal with the problem of the disaggregation of ethical responsibility, managers can use organizational culture and ethical values to control the performance of employees and of other organizations. Contemporary developments in business ethics also offer tools for dealing with the problem. For example, "global corporate citizenship," integrated social contracting theory, and stakeholder learning dialogues provide ways of integrating the interests of all stakeholders. The task is now to use these new approaches to create a governance process that incorporates the voices of all stakeholders, especially the voices of those stakeholders that have legitimate and urgent moral claims, but lack the power to establish those claims.     

Environmental Certification and Technical Efficiency: A Study of Manufacturing Firms in India

Obtaining environmental certification (such as the ISO-14,001) has become a status symbol for adopting greener practices for the corporate sector in emerging economies. Such certification can help improve the global visibility of firms and is mandated in international trade. This paper attempts to examine the impact of such certifications on technical efficiency of firms belonging to the manufacturing sector in India. In analyzing the impact of ISO Certification on technical efficiency, this paper uses data from the CMIE Prowess from 2007 to 2012. In the first step, the paper estimates technical efficiency for the sample firms and then examines the determinants of inter-firm differences in technical efficiency using firm specific characteristics. The results of this study conclude that there are substantial inter-firm differences in technical efficiency and they are systematically different based on firm age, firm size, debt capital, MNE affiliation, and ISO certification. ISO certification, especially maintaining the standards associated with it, turned out to be an important factor in making the firms achieve higher technical efficiency. In addition, the results of this study also confirm that firms that are ISO certified and doing R&D are better off in technical efficiency as compared to others.     

The High Growth in New Metal-Based Manufacturing and Business Service Firms in Finland

This study examined the effects of the factors involved in the start-up situation and the first seven years' development on the subsequent high growth of firms. The criterion of success used in this study was high growth in business during the first seven years. The subjects were Finnish metal products manufacturing firms and business service firms established in 1990. The results indicated, firstly, that it is the internal networks of firms that bring about competitive advantage, innovations and efficiency. In these entrepreneurial team-driven firms a group of people participate in the strategic management of the firm. It was also found that co-operation between firms and changes in external personal networks contributed to a high rate of growth. The empirical results showed that new firms had equal chances for growth irrespective of their locality. On the other hand, growth was affected by changes in a new firm's competitive situation and by changes in strategic factors. The results also clearly indicated that high growth firms were characterised by rising productivity of labour at the same time as they were generating new jobs.     

Corporate Social Strategy: Competing Views from Two Theories of the Firm

This paper compares two theories of the firm used to interpret firms’ corporate social strategies in order to derive new insights and questions in this research area. Researchers from many branches of strategic management agree that firms can strategically allocate resources in order to achieve both long-term social objectives and competitive advantage. However, despite some progress in investigating corporate social strategy, studies rely on fundamentally diverging theoretical approaches. This paper will identify, compare and begin to integrate two competing theories of the firm implicit in corporate social strategy scholarship: the resource-based and behavioural theories of the firm. I discuss the implications of these two theories for both researchers and practitioners on key debates within corporate social strategy, and conclude by suggesting several fruitful avenues for future research based on the emerging integration of these two theories of the firm within the strategy literature. Dr. Frances Bowen is an Associate Professor in the Strategy and Global Management Area of the Haskayne School of Business, University of Calgary. Her main research interests cross strategy and organisational theory, focusing on corporate environmental strategy. She has examined firms’ enviromental decisions in a variety of complex decision-making contexts. Current and recent research projects have focused on the roles of subsidiary managers in encouraging environmental initiatives within multinational companies, and how firms might induce suppliers to participate in environmentally sound supply chain management. Her main theoretical interest is how the behavioural theory of the firm can be integrated with the resource-based view to better explain corporate environmental strategy.     

Developing an effective strategic mix of corporate philanthropy

Corporate social responsibility (CSR) has become a very important issue in the business and academic communities alike. However, among various activities of CSR, corporate philanthropy has not attracted much academic effort to date. Therefore, many firms find it challenging to establish the most appropriate mix of philanthropic activities. This study tries to find the most effective strategic mix of corporate philanthropy. For this purpose, three dimensions of philanthropic activities (i.e. who, what, and to whom) are examined, along with the most effective attributes of each. The results show that consumers prefer the activities in which firms, rather than employees, donate their own products to the general public. Implications of the research results are discussed from an academic as well as from a practical standpoint.     

Paradox strategic cognition and ECSR in China: a three-tripod perspective

Literature rooted in institutional theory and stakeholder theory offers conflicting views on the relationship between environmental corporate social responsibility (ECSR) and financial performance. However, both failed to explain why firms interpret this relationship variously which is subjective to a firm’s strategic cognition. How firms interpret this relationship affects the ECSR decision and implementation. Drawing on the paradox theory, four hypotheses were proposed and examined using data from 170 manufacturing firms in China. This study found paradox strategic cognition positively affects ECSR. Legal enforcement inefficiency, competitive intensity and industrial power weaken the effect of paradox strategic cognition on ECSR.     

How Do Innovations Affect Mergers and Acquisitions—Evidence from Finland?

We have analysed whether innovations in a firm's possession increase a firm's propensity to buy other firms and, on the other hand, whether this possession attracts other firms so that they buy the firm concerned. Our results suggest that in the heavily investing processing industries high entry costs and the incumbency of all the firms make more efficient firms—the possessors of innovations—acquire inefficient firms. On the other hand, in the non-processing industries innovators become, according to our findings, easily purchased by the other firms whose strength obviously lies in other areas than in innovative activity. JEL classification  G34, O31, O32     

Environmental Hostility and Firm Behavior—An Empirical Examination of New Technology-Based Firms on Science Parks

Firms often respond to challenging environmental conditions, such as those in high-technology environments. Thus, in a hostile environment, the intensity of competition exerts more pressure on the firm and also a greater necessity for firm behavior. This study was conducted with empirical data collected in 1999 from 134 small firms on science parks in Sweden. The discussion in this paper is focused at the firm level. Analysis of firm behavior was conducted using a multivariate approach. The content of firm-level behavior is defined in terms of the firm's overall collection of business practices and competitive tactics. The investigation of customer preferences and competitors are the manifestations of the firm's more basic strategic direction and how the firm will reach the markets. Two different types of firms were analyzed: university spin-offs (USOs) and corporate spin-offs (CSOs). The importance of the science park was included in the study as a control variable. The variable showed whether the firms had received support from a science park. This study indicated that the relations between change of marketing activities and long-term forecasting are strongest for both USOs and CSOs. The long-term forecasting, technology–importance of science park, was another key factor. This is exemplified by the two samples used in this study.     

Survival of high tech firms: The effects of diversity of product–market portfolios, patents, and trademarks

High tech firms can mitigate potential risks by diversifying their product–market portfolios. A key research question is how such diversification influences firm survival. A firm exits the market in two ways, specifically, dissolution and acquisition. Here, we model how the diversity of a new firm's product–market portfolio influences the times to both types of exits. Specifically, we allow for interaction effects of the competitive intensity of a firm's environment and the diversity of a firm's product–market portfolio with its patents and trademarks. Using a competing risk hazard model, we estimate the effects of various covariates on the time to exit for 1435 US high tech firms.We observed that a more diverse product–market portfolio, in conjunction with a larger number of patents, hastens the time to a firm's exit by dissolution (9% decrease in survival duration), while in conjunction with a larger number of trademarks, portfolio diversity delays the time to exit by dissolution (12% increase). A more competitive firm environment results in a greater effect on the portfolio's diversity in delaying its exit by dissolution (7% increase). On the other hand, a diverse product–market portfolio, combined with either a larger number of patents or trademarks, hastens the firm's exit by acquisition (19% and 11% decrease respectively).     

美国网上证券经纪公司发展路径研究

本文认为,网上证券经纪公司会随着企业生存环境的改变,依据自身的内生竞争实力及外生获得性能力不断地在发展过程中进行业务转型和策略调整,以获取其他企业的优势基因,整合企业自有资源,增强企业抗风险能力,从而适应环境的变化,保持企业的长期生存和持久的竞争实力。文章指出,企业的策略选择具有路径依赖的惯性,不同的网上经纪公司会采取不同的策略切入点,同一个企业在不同的发展阶段也会采取不同的策略,选择不同的路径以求得发展和提高。     

Where the eyes go,the body follows?: Understanding the impact of strategic orientation on corporate social performance

This research seeks to address two questions with respect to firm corporate social performance (CSP): (1) “do different strategic orientations have differential impacts on a firm's overall CSP?”; and, if so, (2) “is there an effect of a firm's strategic orientation on the types of CSP that a firm implements?” Using a unique dataset that combines survey data on firms' strategic orientations for 115 US-based firms with CSP data from MSCI-ESG, we empirically examine the impacts on CSP levels of four different firm strategic orientations: customer, competitor, interfunctional coordination, and shareholder. Our empirical analysis demonstrates that (1) firms with a stronger orientation toward customers have higher levels of CSP overall, and (2) when firms have a stronger customer orientation, we find that the firm has higher CSP levels in domains dedicated toward secondary stakeholders, while firms with a stronger shareholder orientation exhibit higher levels of CSP dedicated toward primary stakeholders.     

How do interorganizational and interpersonal networks affect a firm's strategic adaptive capability in a transition economy?

This paper examines the effects of a firm's interorganizational network characteristics and a CEO's interpersonal network ties on a firm's strategic adaptive capability in a transition economy. Using a unique survey dataset of 250 Chinese firms, the paper focuses on the compositional diversity of a firm's interorganizational network and the structural holes in a CEO's interpersonal network. The results show that an interorganizational network that is diverse in composition and an interpersonal network that is rich in structural holes have significantly positive effects on a firm's strategic adaptive capability in China's transition economy. However, a negative interaction effect occurs between interorganizational network diversity and interpersonal network structural holes. The results suggest that managers simultaneously consider both the individual and joint effects of interorganizational and interpersonal network characteristics when developing firm strategies.     

Can socially irresponsible firms benefit from corporate advertising?

Abstract

Can corporate advertising improve firm performance following a brand crisis borne out of corporate social irresponsibility (CSI)? This article investigates socially irresponsible firms and their corporate advertising expenditures, which can be used to counter negative opinions. First, we examine whether firms experiencing a negative brand image due to socially irresponsible behavior alter their corporate advertising expenditures. Next, we assess the resulting impact of corporate advertising spending by CSI firms on overall performance. Using a sample of firms engaging in socially irresponsible behavior between 1995 and 2011, we find that such firms tend to increase their corporate advertising. Such changes in corporate advertising expenditures ultimately impact firm performance. Specifically, an increase in corporate advertising helps to reduce the negative effect of CSI on firm performance.