Sustaining Competitive Advantage Through Corporate Environmental Performance

This research investigates the relationship between a firm's environmental efforts and the sustainability of its competitive advantage by analyzing the effects of change in firm environmental performance on the persistence of profitability growth. We find that environmental resources allow a firm with superior financial performance to sustain its competitive advantage, and also complement the efforts of a poorly performing firm to hasten recovery from inferior financial performance. Our findings further indicate that firms attain such positive effects through enhanced profit margins resulting from improved environmental performance. Additionally, we observe that a corporate strategy of improving environmental performance demonstrates management's responsibility to maximize the shareholder wealth of a well‐performing firm. The results provide valuable insights to align environmental activities towards developing unique resources for sustaining the competitive advantage. The study provides an empirical support for creating economic value by benefiting the environment. Copyright © 2016 John Wiley & Sons, Ltd and ERP Environment     

A configuration of sustainable sourcing and supply management strategies

This paper seeks to analyze empirical differences and patterns in applied sustainable sourcing and supply management (SustSSM) strategies. The question is whether companies employ individual SustSSM practices in reoccurring configurations. The study aims to identify such typical corporate SustSSM approaches and how they vary across contingency factors such as industry or region. We employed a two-step methodology. First, a literature review derives scoring scales for six categories of how companies can integrate sustainability into sourcing. Second, using these scales for a content analysis of sustainability reports from 99 corporations spread across different regions, a taxonomy is derived by means of a cluster analysis.Identifying five corporate types of how firms configure their SustSSM strategy, the analysis suggests that companies do not combine SustSSM practices randomly. Rather, individual SustSSM practices are combined to alternative configurations that follow different logics to form sustainable sourcing strategies. Addressing a cross-regional and cross-industry sample, the results encourage further investigating the interplay of different SustSSM practices. In doing so, we show the need to align SustSSM configurations with a firm's specific operative supply chain structures and strategic goals.     

Do board sustainability committees contribute to corporate environmental and social performance? The mediating role of corporate social responsibility strategy

The purpose of this study is to investigate the impact of board sustainability committees on environmental and social performance and to examine the mediating effect of corporate social responsibility (CSR) strategy on the relationship between the presence of board sustainability committees and corporate sustainability performance. Using data of U.K. listed firms for the period of 2009–2016, the study employs panel regression analysis and bootstrapping techniques to test study hypotheses. The results suggest that the presence of a sustainability committee improves the effectiveness of CSR strategies. The results also indicate that firms with effective CSR strategies exhibit better environmental and social performance. Further, the empirical results show that the effectiveness of CSR strategy explains the positive relationship between board sustainability committees and corporate environmental and social performance, thus supporting the theoretical framework of the study. The findings of the study shed new light on this research direction and could be of interest to board members, managers, practitioners, investors, policy makers, and regulators that plan to promote sustainability practices and strategies needed for sustainable development.     

Environmental proactivism and firm performance: evidence from security analyst earnings forecasts

There is an ongoing debate over the impact of corporate pro-environment actions and strategies (reflected, for example, in pollution prevention and emission reductions, product re-design, materials stewardship) on corporate financial performance in US corporations today. A review of the existing literature in this area yields no consistent pattern of relationships between corporate environmental proactivism and financial performance when historical corporate accounting performance and stock market measures of performance are used. We revisit this relationship using a novel measure of firm performance: security analyst earnings forecasts. Specifically, we demonstrate a significant, negative relationship between environmental proactivism (using Toxic Release Inventory data) and industry analyst 1- and 5-year earnings-per-share performance forecasts for a sample of 523 US firms in 1992. We discuss the implications of these findings and provide suggestions for future research. © 1997 John Wiley & Sons, Ltd and ERP Environment.     

Corporate sustainability and financial performance: Collective reputation as moderator of the relationship between environmental performance and firm market value

Markets value superior corporate sustainability performance in part because investors use a firm's environmental performance as a signal of desirable but difficult-to-observe attributes, such as the firm's integrity capacity. Yet a signaling conflict can arise when a firm belongs to an organizational form that has a collective reputation for being unethical. In such circumstances, the firm's environmental performance may no longer credibly signal its underlying integrity capacity, leading markets to adjust downward the value they would otherwise place on the firm's environmental performance. Using longitudinal data on South Korean firms, we find that improvements in firm environmental performance lead to smaller increases in market values for firms belonging to a poorly reputed organizational form. However, firms can partially recover lost value by adopting firm features that reduce the signaling conflict, thereby restoring the notion of corporate sustainability performance driving firm market values.     

Do managerial behaviors trigger firm exit? The case of hyperactive bidders

This paper investigates the effects of managerial mergers- and acquisitions-related investment strategies on the exit risk of firms. Using a sample of hyperactive bidders, I show that managerial excessive acquisitiveness can precipitate firm exit. Overbidding is associated with weak corporate governance and lower disclosure quality within firms. I find that hyperactive bidders take more risk compared to conservative bidders. Such bidders also misallocate firms’ resources and dent firms’ reputational capital. Eventually, the external corporate control market is more effective compared to mechanisms such as bankruptcy reorganization, forced liquidation, leveraged buy-out, and expulsion from stock exchanges in disciplining hyperactive bidders by turning them into targets of takeover. These results suggest that a hyper acquisition-induced growth strategy is, on average, detrimental to the long-term survivability of firms and that the internal and external corporate-control mechanisms may not be effective enough to forestall falling value of an excessively acquisitive firm.     

Corporate social responsibility and corporate performance: a quantile regression approach

This paper investigates the impact of corporate social responsibility activities on corporate performance. In view of the inconsistent empirical findings in the literature, and the limitations of least squares regressions, we adopt a quantile regression method to fill this gap in the literature. An important finding is that the sensitivity of a company’s performance to its engagement in corporate social responsibility activities does not vary with the quantile location of the firm’s performance level, and the engagement in corporate social responsibility activities has a significant positive relation with corporate performance across all quantiles. This study argues that undertaking corporate social responsibility leads to greater financial returns than the related costs. Therefore, this study concludes that engaging in corporate social responsibility is beneficial for firms, and thus worth implementing.     

Do Board's Corporate Social Responsibility Strategy and Orientation Influence Environmental Sustainability Disclosure? UK Evidence

The environmental implications of corporate economic activities have led to growing demands for firms and their boards to adopt sustainable strategies and to disseminate more useful information about their activities and impacts on environment. This paper investigates the impact of board's corporate social responsibility (CSR) strategy and orientation on the quantity and quality of environmental sustainability disclosure in UK listed firms. We find that effective board CSR strategy and CSR‐oriented directors have a positive and significant impact on the quality of environmental sustainability disclosure, but not on the quantity. Our findings also suggest that the existence of a CSR committee and issuance of a stand‐alone CSR report are positively and significantly related to environmental sustainability disclosure. When we distinguish between firms with high and low environmental risk, we find that the board CSR/sustainability practices that affect the quantity (quality) of environmental sustainability disclosure appear to be driven more by highly (lowly) environmentally sensitive firms. These results suggest that the board CSR/sustainability practices play an important role in ensuring a firm's legitimacy and accountability towards stakeholders. Our findings shed new light on this under‐researched area and could be of interest to companies, policy‐makers and other stakeholders. Copyright © 2017 John Wiley & Sons, Ltd and ERP Environment     

Commitment Strategies for Sustainability: How Business Firms Can Transform Trade‐Offs Into Win–Win Outcomes

This paper addresses a fundamental problem in corporate sustainability: How can corporations transform trade‐offs through win–win‐oriented governance strategies aimed at creating value? Drawing on new strands of research in business ethics, we employ an ‘ordonomic’ perspective and proceed in four steps. First, we sketch how sustainability semantics has evolved historically from a societal searchlight to a heuristics for business practice. Second, we discuss how business firms can make strategic use of moral commitments as governance contributions by deploying individual or collective self‐commitments as well as commitment services in their stakeholder relations. Third, we combine these four governance strategies with the three ESG (‘ecological, social and governance’) criteria of sustainability. We derive and illustrate with real‐life examples a 12‐box matrix as a tool for the strategic management of corporate sustainability. Fourth, we discuss the specific contribution of our ordonomic approach to the literature. Copyright © 2012 John Wiley & Sons, Ltd and ERP Environment     

Enhancing the role of human resource management in corporate sustainability and social responsibility: A multi-stakeholder,multidimensional approach to HRM

This paper focuses on the increased pressure for corporations to engage in corporate sustainability (CS) and corporate social responsibility (CSR) in order to address the current crisis of confidence in business, align their activities with the needs and expectations of a broader set of stakeholders, and help tackle the world's grand challenges. We argue that human resource management (HRM) has a potentially vital role to play in contributing to a firm's CS/CSR efforts, but so far has failed to deliver. We explore the reasons for this failure and discuss ways for HRM to play a more prominent role in the design and implementation of a firm's CS/CSR strategy. Building on earlier attempts to integrate corporate responsibility and sustainability into the HRM performance construct, we propose a multidimensional, multi-stakeholder approach to sustainable HRM that encompasses activities aimed both at avoiding harmful consequences for stakeholders and contributing to positive outcomes along the triple bottom line (i.e., people, planet, and prosperity). We discuss implications for research and develop a set of propositions and guidelines for future research.     

Corporate sustainability strategies in institutional adversity: Antecedent,outcome, and contingency effects

This study examines (i) how top-level managerial institutional ties drive corporate sustainability strategies of emerging market firms operating under conditions of institutional adversity; (ii) the impact of corporate sustainability strategies on market performance; and (iii) the moderating role of financial resource slack on the relationships between corporate sustainability strategies and market performance. The study builds from institutional development logic and the structure–conduct–performance paradigm. Primary data are collected from 300 firms operating in a major sub-Saharan African market. Findings show that top-level managerial institutional linkages with regulatory national governmental officials, local community leaders, and top managers at other firms drive corporate proactive and responsive sustainability strategies, which in turn influence market performance. In addition, the findings reveal that financial resource slack strengthens the path between corporate proactive sustainability strategies and market performance, but not the path between corporate responsive sustainability strategies and market performance. Theoretical and practical implications are discussed.     

Impact of CEO narcissism and hubris on corporate sustainability and firm performance

To explore the personality traits and corporate strategy of chief executive officers (CEOs), this study investigates how narcissistic and hubristic tendencies in CEOs affect the relationship between corporate sustainability practices (CSP) and firm performance. The primary purpose is to examine whether CEO narcissism and hubris can moderate the effect of corporate sustainability on firm performance. We investigate the influence of corporate sustainability on firm performance in three dimensions: economic, environmental, and social. The relationship between the mechanisms of supervision and agency theory is explored to assist investors in decision making. The results of this study show that compared to narcissistic CEOs, hubristic CEOs will further enhance the positive influence of CSP on corporate performance, especially in the environmental and social dimensions. This research strengthens the literature on CEO narcissism and hubris by demonstrating that CEO personality traits influence the relationship between corporate sustainability practices and firm performance.     

Labor union negotiations: stepping stones or stumbling blocks for a responsible downsizing strategy? Empirical tests in Taiwan

Firms have used organizational downsizing strategies for years. But organizational downsizing not only cannot surely improves firm performance, but also harms thousands of employees and their families. A number of scholars investigating organizational change suggest that ‘a responsible downsizing strategy’ can mitigate or solve this issue. As the major stakeholder in downsizing, labor unions naturally negotiate with firms to protect employee rights and benefits. Their negotiation, therefore, may either enhance or mitigate the effect of responsible downsizing strategy on firm performance. This study used a sample of 154 downsized local firms and multinational corporations in Taiwan to examine the research construct, and invited focus groups to have a further validated explanation. The findings show that labor union negotiation may act as either stepping stones or stumbling blocks. The results indicate that firms employing labor union negotiation experience higher downsizing performance than non-unionized firms do. However, labor union interventions can also become stumbling blocks. Labor union negotiation neutralize the positive effect of employee-caring practices on downsizing performance, leading to a decline in downsizing performance when firms increase employee participation and justice consideration in the downsizing process. The research findings provide implications for further scholarly research and management practices in terms of organization change, stakeholder management and labor–management relationship.     

Building External Corporate Venturing Capability*

ABSTRACT How firms build new capabilities to adapt to changing environments is at the core of strategic management. However, research has addressed this question only recently. In this paper, I propose a model that describes how firms develop a capability to create and develop ventures through corporate venture capital, alliances, and acquisitions. The model is based on two longitudinal case studies of large corporations operating in the information and communication technology sector in Europe. At the core of this model are learning processes that enable the firm to build up an external corporate venturing capability, by utilizing learning strategies both within and outside venturing relationships. To build this new capability, firms engage in acquisitive learning. Critical to deepening the capability acquired is adaptation of all knowledge to the firm specific context through experiential learning mechanisms. I also discuss the important role that initial conditions and knowledge management practices play in determining the direction and effectiveness of specific learning processes that lead to an external corporate venturing capability.     

Corporate Value, Managerial Stockholdings and Investments of Japanese Firms

We use a simultaneous equation model which treats firm value, investments and management ownership as endogenous to the firm. Our results show a feedback relation between corporate value and management ownership, i.e., corporate value is positively impacted by management ownership, which in turn is positively impacted by corporate value. Corporate value also affects investments made by the firm. We also find that the effect of the main bank on corporate value is positive but only up to a certain point; then, it turns negative. Supporting the argument that keiretsu firms have lower agency cost, we find that firms belonging to a keiretsu have higher valuations during the sample period. Finally, we find that management ownership increases as the ownership of the main bank, ownership of institutional holders and cross‐holdings decreases, suggesting a substitution effect among these monitoring forces. Our results indicate that ignoring the web of these relationships leads to incorrect inferences.     

Does corporate environmental responsibility engagement affect firm value? The mediating role of corporate innovation

This paper aims to construct a comprehensive corporate environmental responsibility (CER) engagement measurement to examine the relationship between CER engagement and firm value as well as explore the mediating effect of corporate innovation on this relationship based on a sample of 496 China's A‐share listed companies from 2008 to 2016. The results show that when firms start to adopt environmental regulations, CER would have a negative effect on firm value; however, at a specific level, CER would start to enhance firm value positively. In addition to this, corporate innovation plays a mediating role in the relationship between CER and firm value. Corporate innovation promotes firm value of firms with CER more than firms without CER. Overall, the findings of this paper are extremely relevant for the government, investors, and firm's managers and can be utilized for policy and investment decision making. Also, the findings encourage firms to enhance their sense of environmental responsibility in order to enhance their competitive advantages, enhance corporate innovation capabilities, and thus enhance firm value.     

Recasting Enterprise Strategy: Towards Stakeholder Research That Matters to General Managers

As well as specifying functional, business unit, and corporate levels of strategy, early strategy scholars delineated enterprise level strategy as the uppermost level of strategy. Enterprise strategy articulates how the firm engages with actors in its economic, social, and political environment to ensure long‐term corporate performance. As a growing body of evidence shows, heterogeneity in how firms identify, and engage with, their stakeholders can explain why some firms outperform their peers. However, my literature survey of more than three decades of published research reveals that enterprise strategy has stayed firmly in the shadows behind business and corporate strategy. Furthermore, many theories of firm–stakeholder relationships are normative (i.e. explain how firms should act) and do not inform strategy effectively. In this paper, I argue why enterprise strategy research is required as a cohesive body of work that connects with research in business and corporate strategy. I finish by proposing three research domains – strategic goals, organization design, and organization boundaries – that hold the potential to link stakeholder issues with mainstream concerns in strategy research and, thus, to revive a coherent research programme in enterprise level strategy.     

Two Dimensions of Corporate Sustainability Assessment: Towards a Comprehensive Framework

Over the last years, many approaches have emerged that attempt to measure the contribution of firms to sustainable development, i.e. corporate sustainability. Our review of existing methodologies for the assessment of corporate sustainability reveals two major shortcomings. First, value creation as a core condition for sustainability as well as for further contributions to economic sustainability is often ignored in these assessments, suggesting that financial and non‐financial organizational processes are separable. Second, existing approaches fail to differentiate between the actual contribution of a firm to sustainability on the one hand, and governance‐related features aimed at attaining this contribution on the other. We argue that the implementation of sustainability‐oriented organizational structures and managerial instruments alone does not necessarily guarantee sustainability performance. Therefore, besides the dimension of current sustainability performance, we introduce the notion of sustainability governance as a second distinct dimension of corporate sustainability assessment. Copyright © 2011 John Wiley & Sons, Ltd and ERP Environment.     

Corporate Social Responsibility and Social Entrepreneurship

Milton Friedman argued that the social responsibility of firms is to maximize profits. This paper examines this argument for the economic environment envisioned by Friedman in which citizens can personally give to social causes and can invest in profit‐maximizing firms and firms that give a portion of their profits to social causes. Citizens obtain social satisfaction from corporate social giving, but corporate giving may not be a perfect substitute for personal giving. The paper presents a theory of corporate social responsibility (CSR) and shows that CSR is costly when it is an imperfect substitute. When investors anticipate the CSR, shareholders do not bear its cost. Instead, the entrepreneurs who form the CSR firms bear the cost. Shareholders bear the cost of CSR only when it is a surprise, and it is to such surprises that Friedman objects. A social entrepreneur is willing to form a CSR firm at a financial loss because either doing so expands the opportunity sets of citizens in consumption‐social giving space or there is an entrepreneurial warm glow from forming the firm. Firms can also undertake strategic CSR activities that increase profits, and a social entrepreneur carries strategic CSR beyond profit maximization and market value maximization. The paper also examines the implications of taxes and the effect of the market for control for the sustainability of CSR.     

The Effect of Founding Family Influence on Firm Value and Corporate Governance

We examined a sample of 120 Norwegian, founding family controlled and non‐founding family controlled firms, to address two important research questions: (1) is founding family control associated with higher firm value; and (2) are there unique corporate governance conditions under which a founding family controlled firm can be more valuable? We find a positive association between founding family control and firm value for four alternative definitions of founding family control. We find that the association between founding family CEOs and firm value is stronger among younger firms, firms with smaller boards, and firms with a single class of shares. However, the impact of founding family directors on firm value is not affected by corporate governance conditions such as firm age, board independence, and number of share classes. We also find that the relation between founding family ownership and firm value is greater among older firms, firms with larger boards, and particularly when these firms have multiple classes of shares. Our results imply that founding family controlled firms are more valuable and governed differently than firms without such influence. Furthermore, our results also suggest that founding family CEOs can enhance firm performance when family influence does not create shareholder entrenchment or when their cash flow rights are more aligned with their control rights.