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.     

Environmental Policies for Sustainable Development: An Analysis of the Drivers of Proactive Environmental Strategies in the Service Sector

This article examines the drivers of environmental proactivity in the service sector. Hypotheses were tested using multiple hierarchical regression analysis with data from a sample of 41 managers in Spanish environmental consulting companies. Results show statistically significant relationships between (1) managers’ attitude towards sustainable development, (2) positive short‐term firm performance and (3) the strategic attitude of environmental consulting firms and the adoption of proactive environmental strategies by the studied companies. This article is pioneering in the analysis of drivers of corporate proactive environmental strategies in the consultancy sector. The findings have practical implications for policy‐makers, investors and other agents interested in a better management of the environment. Economic incentives such as subsidies to environmental training programmes for managers can induce changes in cognitive components of managers’ attitudes. Education policies could also affect managers’ attitudes towards the environment. Companies may also encourage attitude change by providing their managers with financial assistance to receive environmental training. External assistance to develop a strategic attitude could be an interesting policy to encourage voluntary environmental initiatives. Finally, fiscal deductions, tax breaks or subsidies to those companies interested in managing the environment can be effective incentives for those firms facing a weak short‐term financial situation. Copyright © 2014 John Wiley & Sons, Ltd and ERP Environment     

Adherence to environmental law: the strategic complementarities of compliance decisions

In this paper we address why firms comply with environmental regulations when enforcement is weak by suggesting that firms choose their level of environmental compliance strategically. Our theoretical model shows that compliance decisions among firms are strategic complements—increased compliance by one firm will positively influence the compliance rate of its rival. In our empirical analysis we find that the compliance rates of other regulated entities have a positive and significant effect on a regulated source's compliance behavior in three of our four heavily regulated industries. If compliance decisions are strategic complements, this may partially explain high compliance rates in the presence of limited regulatory pressure.     

How to respond to competitors' green success for improving performance: The moderating role of organizational ambidexterity

With increasing environmental competitions between companies, there is a pressing need to explore how the environmental pressures from rivals influence focal firms' actions and the subsequent performance consequences. On the basis of social contagion theory and upper echelons theory, we examine whether firms respond to competitors' green success through green supplier integration, which further improves firm performance, and the moderating effect of organizational ambidexterity. The research explores hypothesized relationships adopting hierarchical regression analysis and bootstrapping method by collecting survey data from 206 Chinese manufacturers. Our findings suggest that competitors' green success positively influences green supplier integration. Green supplier integration mediates the impacts of competitors' green success on financial and environmental performance. In addition, the combined dimension of organizational ambidexterity plays a positive moderating role in the impacts of green supplier integration on financial and environmental performance. This study expands previous literature and managers' practices on green supply chain management.     

Strategizing Environmental Policy and Compliance for Firm Economic Sustainability: Evidence from Taiwanese Electronics Firms

This study aims to examine whether the compliance of environmental policies can sustain firm economic performance, and whether a timing issue is relevant to firm economic sustainability in pursuit of eco‐friendly efforts. Offering models predominantly based on the institutional theory, this study tests hypotheses using data from 284 companies in the electronics sector in Taiwan during the period from 1997 to 2010. The findings reveal that the execution of environment policies mostly improves firm economic sustainability and some joint green efforts can even strengthen such sustainability; however, firms aiming to sustain their economic performance should not hasten to undertake eco‐friendly efforts, implying that first movers may not be guaranteed firm economic performance. Thus, managers should carefully strategize their green efforts to comply with environmental policies, and execute them in due course to prevent disadvantages, such as market uncertainty and complexity of green practices, while conquering organizational inertia. Copyright © 2012 John Wiley & Sons, Ltd and ERP Environment     

Managing human resources in dynamic environments to create value: role of HR options

HR options as firm investments in human assets in uncertain environments to create the capability to flexibly respond to future contingent events have been recognised as valuable. However, the black box of causal interlinkages between environmental uncertainties, HR options and firm performance is yet to be explored in strategic HRM literature. Based on the data obtained from 108 IT software firms in India, this study empirically explores these linkages using a multi-level causal model. The results suggest that the use of HR options positively mediates the effects of environmental uncertainties on firm performance. The mediating influences of different types of HR options, used by the firms to manage various types of uncertainties affecting their human assets, on the operational and the financial performance of the firms are found to be different. Implications of findings of the study for managing investments in human assets under uncertainty have been discussed.     

Doing more and doing better are two different entities: Different patterns of family control and environmental performance

Family firms bear two types of agency costs, including type I and type II agency problems, in corporate environmental practices: (1) Outside executives at family firms hesitate to engage in environmental strategies, which can lead to drops in profits; (2) Controlling families employ opportunistically environmental management to achieve their interests. We argue that a primary cause for the agency problems lies on ineffective internal corporate governance at family firms, which can cause loss of managerial (or power) balance between outside executives and family executives. Our findings show that family firms with ownership and strategic control (FSC), which family executives and outside executives monitor and constrain each other, can achieve the highest environmental performance. Moreover, external controls, including product market competition and provincial environmental regulations, substitute effective internal control of FSC. The environmental performance premium of FSC is more prevalent when the production market competition is lower. Family firms with ownership, operational, and strategic control (FOSC) can achieve higher environmental performance within a province with more stringent environmental regulations.     

Corporates' strategic responses to economic policy uncertainty in China

Using a novel news‐based index of economic policy uncertainty, this paper studies the impact of economic policy uncertainty on corporate strategic positioning and corporate risk in China from 2009 to 2015. The study also investigates the impact of corporate strategic positioning on corporate risk. The results show that corporate strategic positioning and economic policy uncertainty have a significant positive impact on corporate risk. The results also explain that economic policy uncertainty increases the market risk of the firms irrespective of their corporate strategy. However, it increases the business risk of prospector firms and decreases the business risk of defensive firms. The study may help the firms to formulate and improve their strategic positioning while considering economic policy uncertainty. Our results are robust to alternate proxies of economic policy uncertainty and corporate risk.     

Intra‐firm differentiation of compensation systems: evidence from US high‐technology firms

While scholars have long recognised the influence of firm decisions on aspects of compensation (e.g. pay level and pay mix), prior compensation studies offer an ambiguous understanding regarding their scope. Some studies argue that firms customise compensation decisions according to employee groups, whereas others assume that firm compensation decisions apply uniformly throughout a firm. To address this research gap, the current study analyses pay levels and pay mixes for R&D employees and administrative employees in US high‐technology firms. Our empirical analyses show that firms make distinct compensation decisions for these two job families, but these decisions are ultimately consistent. These findings highlight firms' intention to strike a balance between customising compensation systems according to employee groups and maintaining internal consistency. Our findings add interesting insights to the strategic HRM and talent management literatures, which claim that firms should differentiate among employees when designing HRM systems.     

Corporate entrepreneurship and acquisitions: creating firm wealth

Acquisition is one way entrepreneurial firms have to capture the assets needed to achieve their strategic objectives. We investigate shareholder value creation of Spanish listed firms in response to announcements of acquisitions over the period 1991–2006. Similar to foreign markets, bidders earn insignificant average abnormal returns regardless of the pricing model used in the estimation procedure. When we relate these results to company and transaction characteristics our evidence suggests that the listing status of the target firm is a critical key in the strategic decision to acquire a company. This listing status effect is mainly associated with the fact that unlisted firms tend to be smaller and lesser–known firms, and thus suffer from a lack of competition in the market for corporate control. Consequently, the payment of lower premiums and the possibility of diversifying shareholders’ portfolios lead to unlisted firm acquisitions being viewed as value–orientated transactions which have major implications for managers.     

Institutional Constraints,Stakeholder Pressure and Corporate Environmental Reporting Policies

Within the theoretical framework of socio‐political economics, and more specifically of stakeholder theory, this work examines whether companies operating under different institutional constraints and stakeholder pressure tend to emphasize different models of corporate environmental reporting. Furthermore, the paper tests whether different corporate environmental reporting policies are driven by the countries' corporate governance systems. A sample of 3931 international companies was examined through a logistic biplot and conditional mean linear regression models. The main results reveal that companies follow two distinct environmental reporting approaches, which depend on specific stakeholders and institutional requirements. The first model, which is followed by firms within codified law countries, mostly focuses on water and emissions. The second approach, mainly followed by companies operating in common law countries, emphasizes materials and energy issues. This finding reveals that companies gradually modify their environmental strategies to make themselves more compatible with the characteristics of the social and institutional environment, which will result in several corporate benefits. The paper provides several outstanding implications for companies' strategic managers, national institutions and firms' stakeholders, especially for investors and customers. Copyright © 2017 John Wiley & Sons, Ltd and ERP Environment     

The impact of stakeholder orientation on sustainability and cost prevalence in supplier selection decisions

The stakeholder approach has taken a prominent role in the discussion of sustainability measures at varying strategic levels and corporate functions. Literature on sustainability suggests that firms have to cope with enhanced pressure from different stakeholder groups regarding their upstream supply management practices. At the same time purchasing managers face the trade-off between sustainability and cost prevalence in selecting new suppliers. Thus, it is of major concern for companies in general and purchasing organizations in particular to know and understand how purchasing managers react to the influence of specific stakeholder groups when it comes to supplier selection decisions. Following this notion we formulate six sets of hypotheses linking the adoption of ethical business culture to the prevalence of sustainability and cost criteria in supplier selection decisions to be tested in a path analytical model.Based on the results of an empirical study conducted with purchasing managers from multi-national firms located in Germany, this paper makes two major contributions: first, it sheds light on direct effects of shareholder, public, and customer orientation on the evaluation of the outlined-trade off; second, it investigates the indirect effects by introducing the formalization of ethical culture as a mediating variable to assess the impact of the three kinds of shareholder orientation on the propensity to select suppliers based on their performance in terms of social and environmental criteria as well as cost performance.     

Emissions permit allocation and strategic firm behavior: Evidence from the oil sector in the European Union emissions trading scheme

With the growing urgency of climate change, governments around the world are increasingly implementing new regulations for greenhouse gases. This trend elevates the importance of examining how firms engage in strategic efforts to influence regulations before they are in place and how they respond once they are in effect (i.e., their ex‐ante and ex‐post strategic behavior). This paper examines the outcomes of such strategic efforts by multinational and domestic oil companies within the European Union emissions trading scheme. An analysis of a panel dataset of oil firms (2008–2012) shows that on average the outcome of ex‐ante strategies did not differ significantly between multinational companies (MNCs) and domestic firms. However, the findings indicate that among those firms that received positive net benefits from the new climate policy, domestic firms were able to maximize these benefits better than MNCs through their ex‐post strategies. In contrast, among the firms that faced net costs due to the policy, MNCs were able to minimize these costs better than domestic firms, ex‐post. This paper advances our understanding of whether and to what extent MNCs differ from domestic firms in their economic outcomes stemming from strategic behavior related to emissions trading. This question is especially pertinent for regulations related to climate change, which is one of humanity's grand challenges and has important consequences for our economic, social, and political systems.     

The effect of oil price uncertainty on corporate investment in the presence of growth options: Evidence from listed companies in China (1998–2019)

We empirically investigate the effect of oil price uncertainty on corporate investment in the presence of growth options using the financial data of listed firms in China from 1998 to 2019. We reveal three key findings in this paper. First, we find that oil price uncertainty has a U-shaped nonlinear effect on corporate investment. In periods of low uncertainty, oil price uncertainty negatively influences corporate investment. However, in periods of high uncertainty, oil price uncertainty positively influences corporate investment. Second, research has found that the U-shaped nonlinear effect is moderated by the irreversibility and growth opportunities of investment decisions. Third, further analyses reveal that this U-shaped nonlinear effect can be changed by a firm’s characteristics. Specifically, this nonlinear effect can only be observed in non-state-owned enterprises and small firms. We test the robustness of our findings and propose several policy suggestions.     

IN SEARCH OF EXCELLENT MANAGEMENT

Despite important advances in recent years, no agreement exists concerning what constitutes management excellence. Specific knowledge of how managerial behaviour is perceived and evaluated by others will help to resolve unsettled questions about what is meant by management excellence and improve the actual decisions of managers. This article examines the determinants of managerial excellence as perceived by corporate CEOs, directors, and financial analysts in Fortune magazine's annual survey of the best-managed American firms in 33 industries. While the firms perceived to be best managed are more profitable and less risky, and grow faster and reward their stockholders more than less well-managed firms, these variables explain only about 30 per cent of the variance in management ratings. the firms perceived to be best managed have more involvement in international markets and research and development, while large firm size and firm diversification reflect negatively upon perceived managerial quality. the relative inability of conventional financial measures of firm performance to explain perceptions of managerial excellence underlines the complex nature both of these perceptions and strategic behaviour. the results support Varadarajan and Ramanujam's conclusion that excellent management depends upon a diverse set of competencies and values, as well as Chakravarthy's contention that the most important characteristic of firm performance is management's ability to transform the firm and adapt to a rapidly changing environment. By contrast, little support is found for the maximization of stockholder wealth criterion of Rappaport.     

Different strokes: regulatory styles and environmental strategy in the North‐American oil and gas industry

The environmental management and policy literature presents competing arguments for and against different styles of environmental regulations – command‐and‐control versus flexible regulations that enable voluntary actions. On the one hand, it is argued that firms will not adopt minimum environmental standards without command‐and‐control regulations and that such regulations may actually result in competitive benefits for first movers. On the other hand, the literature argues that command‐and‐control regulations stifle innovation and that flexible regulations encourage proactive environmental strategies that lead to competitive benefits for organizations. This study compared the environmental strategies and competitiveness of oil and gas firms in two different regulatory contexts – the command‐and‐control based US environmental regulations and the flexible collaborative Canadian context. The study found no significant differences in the degree to which firms within the two contexts were more or less proactive in their environmental strategies or in the extent of competitiveness associated with corporate environmental strategies. Follow‐up interviews with 12 Canadian and US companies indicated that regulations appeared to be more important drivers of corporate environmental practices at initial stages and eventually other external and internal drivers became more important influences on corporate environmental strategies. Copyright © 2001 John Wiley & Sons, Ltd and ERP Environment     

Corporate Governance,Investment, and Firm Valuation in Asian Emerging Markets

We investigate the effects of corporate governance and family ownership on firm valuation through investment efficiency in Asian emerging markets. Using 3 years of time series data from the Credit Lyonnais Securities Asia corporate governance score for 10 Asian emerging markets, we find that good corporate governance leads to better or more efficient investment decisions and eventually to higher firm value. We also find that investors reward firms for improvement in corporate governance. The findings do not hold for Asian firms with a family or concentrated ownership structure. The results are not driven by changes in accounting standards in these markets.     

The Development of Corporate Charitable Contributions in the UK: A Stakeholder Analysis

This paper investigates the determinants of corporate charitable donations within a comparative study of corporate behaviour in two time periods, 1989–90 and 1998–99. The analysis is based on a longitudinal data set that includes over 400 UK listed companies. The determinants of corporate charitable donations are explored within a stakeholder model and the relationship between corporate charitable donations and a set of firm and industry variables is estimated using OLS. Particular emphasis is placed on industry effects and the impact of social and environmental stakeholders. The results highlight a significant change in behaviour between 1989–90 and 1998–99 that may reflect a strategic response by corporate decision‐makers to external concerns over corporate social responsibility. In the early period corporate charitable donations were substantially determined by profits. However, this relationship has weakened during the 1990s as firms have become increasingly responsive to stakeholder influences. The results for the later period emphasize the increasing importance of corporate visibility, and the development of social and environmental influences on corporate charitable contributions.     

Corporate governance and firm performance relationship: Implications for risk‐adjusted return behavior

We examine the impact of corporate governance on firm performance and stock return behavior using panel data for Indian listed firms for 2006 to 2015. Our results suggest that corporate governance improves firm performance. However, corporate governance information fails to provide excess risk‐adjusted returns to investors, as governance information is well assimilated in prevailing stock prices. In addition to extending the scant literature focused on emerging markets, our findings will prove useful to investors, fund managers, and rating agencies in making investment decisions and regulators in assessing the impact of governance norms.     

A comparative analysis of corporate entrepreneurial orientation between selected firms in the Netherlands and the USA

Firms in turbulent or fast-changing environments must continually innovate to remain competitive. This study examined how a firm's strategic management practices influence its entrepreneurial behaviour as compared to an international competitor. Four firms in the Netherlands were each matched with a key competitor in the USA. Several survey measures related to the strategic management process were used along with an instrument related to corporate entrepreneurship practices. Both managers and employees participated in the study. Results revealed significant differences between the Netherlands firms and the US competitors in entrepreneurial orientation. Results also supported these comparative differences along three key dimensions of strategic management as they relate to corporate entrepreneurship. The final set of data revealed a relationship between corporate entrepreneurship and three measures of firm performance. The implications focus upon the key role that culture may play in facilitating corporate entrepreneurship and adaptable organizational practices. Suggestions for further research are also made.