Carlos Eduardo Moreno** Juan Felipe Reyes***
* Este artículo es resultado de un proyecto de investigación titulado “Validación y aplicabilidad de la teoría Visión de la Empresa Basada en los Recursos Naturales para el caso de las MiPyMes colombianas”, realizado de junio de 2008 a enero de 2011 por el Grupo de investigación en Productividad, Competitividad y Calidad de la Universidad Nacional de Colombia. El artículo se recibió el 13-08-13 y se aprobó el 09-10-13. Sugerencia de citación: Moreno, C. E. y Re-yes, J. F. (2013). The value of proactive environmental strategy: An empirical evaluation of the contingent approach to dynamic capabilities. Cuadernos de Administración, 26 (47), 87-118.
** Doctor en Ciencias del Medio Ambiente, State University of New York, College of Environmental Sciences and Forestry, Syracuse, New York, Estados Unidos, 2004; Especialista en Ingeniería Ambiental, Universidad Industrial de Santander, Bucaramanga, Colombia, 1999; Ingeniero Industrial, Universidad Industrial de Santander, Bucaramanga, Colombia, 1995. Profesor Asociado, Departamento de Ingeniería de Sistemas e Industrial, Universidad Nacional de Colombia, Bogotá, Colombia. Pertenece al grupo de investigación Competitividad, productividad y calidad. Correo electrónico: email@example.com
*** MSc. Ingeniería Industrial, Universidad Nacional de Colombia, Bogotá, Colombia, 2011; Ingeniero Industrial, Universidad Nacional de Colombia, Bogotá, Colombia, 2008. PhD Student, Departament of Business Administration, Aarhus University, Aarhus, Dinamarca. Pertenece al grupo de investigación CORE: Change, Organisational Renewal and Evolution. Correo electrónico: firstname.lastname@example.org
The value of a proactive environmental strategy: An empirical survey of the contingent approach to dynamic capabilities
El valor de la estrategia ambiental proactiva: una evaluación empírica del enfoque contingente de las capacidades dinámicas
O valor da estratégia ambiental proativa: Uma avaliação empírica do enfoque contingente das capacidades dinâmicas
The authors propose and test an explicative model for organizational environmental competitiveness. In doing this, they integrate insights from the dynamic capabilities perspective, contingency theory, and the natural resource-based view of the firm. The study evaluates whether perceived uncertainty in the business environment moderates the relationship between a dynamic capability of proactive environmental strategy and competitive advantage, drawing from survey data from 129 firms in Bogotá, Colombia, and using a partially constrained approach to structural equation models of latent interaction. Results suggest that both, perceived uncertainty on customer preferences and changes in the environmental strategy of competitors, and perceived uncertainty on environmental resources and services, moderate the relationship between process and product-related environmental practices and cost advantage.
Keywords: Contingent approach, dynamic capabilities, competitive advantage.
JEL classification: C83, L21, M19.
En este artículo se prueba un modelo que explica la competitividad en un en
torno organizativo. Con este fin, integra conceptos del enfoque de capacidades
dinámicas, de la teoría de la contingencia y de la visión de la empresa basada en los recursos naturales. Se evalúa la hipótesis de que la incertidumbre percibida en el entorno empresarial modera la relación entre la capacidad dinámica de la estrategia ambiental proactiva y la ventaja competitiva, empleando datos de una encuesta a 129 empresas de Bogotá y un enfoque parcialmente restringido de los modelos de ecuaciones estructurales de interacción latente. Los resultados indican que la incertidumbre percibida acerca de las preferencias de los clientes y de los cambios en la estrategia ambiental de los competidores y acerca de los recursos y servicios ambientales moderan la relación entre procesos y prácticas ambientales relacionados con el producto y la ventajas de costos.
Palabras clave: Enfoque contingente, capacidades dinámicas, ventaja competitiva.
Clasificación JEL: C83, L21, M19.
Neste artigo, prova-se um modelo que explica a competitividade em um ambiente organizativo. Com esse objetivo, integra conceitos do enfoque de capacidades dinâmicas, da teoria da contingência e da visão da empresa baseada nos recursos naturais. Avalia-se a hipótese de que a incerteza percebida no ambiente empresarial modera a relação entre a capacidade dinâmica da estratégia ambiental proativa e a vantagem competitiva, ao empregar dados de uma pesquisa a 129 empresas de Bogotá e um enfoque parcialmente restringido dos modelos de equações estruturais de interação latente. Os resultados indicam que a incerteza percebida sobre as preferências dos clientes e as mudanças na estratégia ambiental dos competidores e sobre os recursos e serviços ambientais moderam a relação entre processos e práticas ambientais relacionados com o produto e a vantagem de custos.
Palavras-chave: Enfoque contingente, capacidades dinâmicas, vantagem competitiva.
Classificação JEL: C83, L21, M19.
Corporate approaches to the management ofenvironmental issues have gravitated aroundtwo strategies: Merely complying with environmental laws and regulations, and movingfrom beyond compliance to a more proactiveapproach (Hunt and Auster, 1990; Roome,1992; Aragón-Correa, 1998; Sharma andVredenburg, 1998; Klassen and Whybark,1999; Bowen et al., 2006; Aragón-Correa et al., 2008). While intervention choices in theformer are often driven by environmentalregulations that prescribe specific technologies and processes, the latter involve firm
initiatives based on managerial discretionand the interpretation of environmental issues as opportunities (Aragón-Correa andSharma, 2003).
Within the resource-based perspective oncorporate environmental strategy (Hart,1995; Buysse and Verbeke, 2003), simultaneous and sustained investments in resource domains are manifested in the firm’s environmental pro activity. In his extension of theoriginal resource-based view on corporatestrategy (Barney, 1991; Amit and Shoemaker, 1993, Hart, 1995) argues that competitiveadvantage is derived through the firm’s relationship with its natural environment. Consequently, the extant literature has focusedon studying the effects on competitivenessof two environmental strategies, namely pollution prevention and product stewardship(Hart and Dowell, 2011).
Since Roome (1992), pollution preventionhas typically been associated with continuous improvement and innovation (i.e. Total Quality Management: TQM). Synergies mayexist between waste prevention and LeanManufacturing (King and Lenox, 2001;Rothenberg et al., 2001; Zhu and Sarkis, 2004; Harrington et al., 2008; Yang et al., 2011). Pollution prevention strategies require companies to develop resources, suchas physical assets, the technologies and skillsrequired to use these resources, organizational learning, and cross-functional integration(Russo and Fouts, 1997). Complementary,a product stewardship strategy (Hart, 1995;Christmann, 2000; Vachon et al., 2001) entails integrating stakeholder perspectives thatrepresent the voice of the environment into product design and development (Buysse andVerbeke, 2003). Thus, the process-centeredfocus in the optimization of environmentalfactors is broadened to include the entire supply chain of products (Seuring, 2004; Lintonet al., 2007), which makes product stewardship an area of study that can be closelylinked to green supply chain management(Sarkis, 2012; see Zhu and Sarkis, 2004).
It was not until Aragón-Correa and Sharma(2003) that proactive environmental strategy was seen as a dynamic capability. Following
Eisenhardt and Martin’s (2000) definition of
dynamic capabilities, they demonstrate thatproactive environmental strategy is depen
dent on specific and identifiable processes,is socially complex and specific to organizations, requires the path-dependence and
embeddedness of specific capabilities (see
below), and is non replicable or inimitable(Aragón-Correa and Sharma, 2003, p. 74). Inaddition, Aragón-Correa and Sharma (2003)suggest that dynamic capabilities are contingent on both environment dynamism and on managers’ interpretations of their business environment (Ambrosini and Bowman,2009). Their propositions imply that aspects
of the firm’s external environment, such as state uncertainty, complexity, and munificence, affect the development of a proactive
environmental strategy and also the firm’sability to profit from such strategy (Hart and
Dowell, 2011, p. 1473).
The dynamic capability perspective has had
a significant impact on research regarding
organizations and the natural environment(Hart and Dowell, 2011). Most of the research conducted until now (e.g., Rueda-Manzanares et al., 2008; Sharma et al., 2007; López-Gamero et al., 2011a) has explored the first branch of Aragón-Correa and Sharma’s (2003) propositions, which relates to
understanding how external contingencies
affect the firm’s deployment of capabilities
and resources to develop a proactive environmental strategy. In contrast, less effort hasbeen given to exploring the second branch ofAragón-Correa et al.’s (2003) propositions,which concerns the assessment of the net
benefit of proactive environmental strategy
in the context of the competitive environ
ment in which the firm is embedded (Hart
and Dowell, 2011, p. 1473; Ambrosini andBowman, 2009, p. 40).
In this article, we draw from the theoretical framework proposed by Aragón-Correaand Sharma (2003) in particular, and fromthe dynamic capabilities and environmentalstrategy literature in general, to empiricallytest an explicative model of environmentalcompetitiveness (Wagner and Schaltegger,2004) that corresponds to the contingent (moderation) perspective on dynamic capabilities. Hence, after reviewing the relevanttheoretical approaches and state of the art,we derive hypotheses from the theory, operationalize constructs such as proactiveenvironmental strategy, perceived environmental state uncertainty, and environmentalcompetitiveness, evaluate the reliability andvalidity of such measures, and test these hypotheses through structural equation modelsof latent interaction effects. This article ends with a discussion of results and some propositions for future research.
Proactive environmental strategy is defined
as a pattern of corporate practices beyond therequirements of environmental regulationsand standard actions aiming to reduce theenvironmental impact of operations (Sharma,2000; Aragon-Correa and Sharma, 2003).A growing literature has been concernedabout the implications of proactive environmental strategy on competitive advantage (Hart, 1995; Sharma and Vredenburg,1998; Christmann, 2000; López-Gamero et al., 2009). The majority of these studies aretheoretically driven by the Resource-Based
View of the firm (RBV) (Wernerfelt, 1984;
Barney, 1991), and particularly, its extensionto the natural environment (Hart, 1995). Thismeans that the research has predominantlyfollowed an endogenous perspective becausethe aspects of the external business environment are not considered.
A conceptual contribution that addresses thisissue characterizes proactive environmentalstrategy as a dynamic capability (Aragon-Correa and Sharma, 2003). Dynamic capabilities are proposed as an extension of theRBV in order to stress the exploitation and
reconfiguration of firm-specific resources
to address changing environments (Teeceet al., 1997, p. 510). Dynamic capabilities
are defined as “the firm’s processes thatuse resources—specifically the processesto integrate, reconfigure, gain and release
resources—to match and even create market change” (Eisenhardt and Martin, 2000).Furthermore, dynamic capabilities have theability to confer competitive advantage giventheir path dependent histories (Teece et al., 1997) and idiosyncratic processes (Eisenhardt and Martin, 2000).
Aragón-Correa and Sharma (2003) take thecharacteristics of dynamic capabilities tosupport their view of proactive environmental strategy, arguing that a proactive environmental strategy is therefore “tacit, casually
ambiguous, firm specific, socially complex,
path dependent, and value adding for consumers, [and it] may provide a competitiveadvantage” (Aragon-Correa and Sharma,2003, p. 74). We also support this argumentas follows.
First, a proactive environmental strategy isable to confer improvements in competitiveness and performance (Hart, 1995; Russo andFouts, 1997; Sharma and Vredenburg, 1998;López-Gamero et al., 2009). That is, whena proactive environmental strategy focuses
on process development and efficiency, thefirm is able to reach cuts in terms of costs
as waste is reduced and operations are optimized (Klassen and Whybark, 1999; Christmann, 2000; González-Benito and González-Benito, 2005). On the other hand, practicestowards product/service stewardship enablefirms to explore new markets and differentiate from competitors (Reinhardt, 1998; Maaset al., 2012) as well as reaching a higher reputation (Gilley et al., 2000).
Second, the details of a proactive environ
mental strategy are specific to the particularfirm, which indicates the idiosyncrasy of
such dynamic capability (Aragon-Correa andSharma, 2003). As managers are responsiblefor the implementation of strategies, the extent to which a proactive strategy is deployeddepends upon how managers interpret thenatural environment (Sharma, 2000). That is,the uniqueness of a proactive environmentalstrategy is determined by the particular interpretation of environmental issues as opportunities or threats (Sharma, 2000) as well as theperceived level of impact of environmentalconstituencies (Banerjee, 2001). Dependingon the managerial interpretations, managers
are able to influence in different ways the
resource allocation and decision making soas to convert pressures into effective actionsto deal with the natural environment (Bansaland Roth, 2000; Colwell and Joshi, 2013).
Third, a proactive environmental strategy canbe understood as a dynamic capability that
is path dependent as the firm has followed
a trajectory of competence development(Teece et al., 1997). By following such a developmental trajectory, the firm has accumulated the necessary resources to move frommerely reactive and compliance-oriented, to more proactive approaches (Hunt and Auster,1990; Roome, 1992).
Fourth, as a dynamic capability, a proactiveenvironmental strategy requires the complex
integration and configuration of a series of
tacit resources and capabilities (Aragon-Correa and Sharma, 2003). Particularly, thefocus on pollution prevention of a proactive
environmental strategy “builds within a firm
the resources of organizational commitmentand learning, cross-functional integration,and increased employee skills and participation” (Russo and Fouts, 1997, p. 539). A dynamic capability of proactive environmental
strategy is able to integrate, re-configure and
re-combine those resources and capabilities(Aragon-Correa and Sharma, 2003). Furthermore, a proactive environmental strat
egy allows firms to develop new resources
(López-Gamero et al., 2009). The literaturesuggests the association of a proactive environmental strategy with competitive valuableenvironmental capabilities, such as sharedvision, continuous improvement and stakeholder integration (Hart, 1995; Sharma andVredenburg, 1998), as well as process innovation and implementation (Christmann,2000). The complexity of a proactive environmental strategy is also given by its integration into the strategic planning process(Judge and Douglas, 1998), administrative,entrepreneurial and technical dimensions of
the firm (Aragon-Correa, 1998).
Some empirical verification subscribed to the
dynamic capabilities approach in the contextof environmental management has been advanced in the literature. Menguc et al. (2010)argue that a dynamic capability of proactive environmental strategy not only is characterized by the aggregation of pollution controlmeasures but it also implies top-managementsupport. It emerges as a response to the pressures from environmentally sensitive cus
tomers and exerts a positive influence on firm
performance (Menguc et al., 2010). Theyalso found that a proactive environmentalstrategy as a dynamic capability builds on the
entrepreneurial orientation of the firm, and
this relationship is stronger at higher levelsof regulatory pressure (Menguc et al., 2010).
The dynamic capabilities approach has beenevidenced as a mechanism to improve environmental performance. Judge and Elenkov(2005) characterize a dynamic capability oforganizational change arguing that the pursuit of goals towards environmental performance requires adaptability and innovativeness. Similarly, based on a case study, Wu et al. (2012) suggest that the dynamic capabilityfor strategic change towards sustainabilityis a multidimensional construct that entails
scanning, identification and reconfiguration
Empirical studies also approach path-dependencies of dynamic capabilities in environmental management. Russo (2009)explores how dynamic capabilities influence the ability to improve environmentalperformance, which leads him to argue that“the creation and deployment of environmental management skills would appear tobe a prime example of the development of adynamic capability” (Russo, 2009, p. 308).In particular, the study approaches the path-dependent learning processes that characterize environmental management as a dy-namic capability. Path-dependent learning
is manifested through “efficiencies dealing
with waste handling in a routinized fashion,in conducting and responding to audits inrecognizing and prioritizing possibilities forimprovement” (Russo, 2009, p. 310). In asimilar vein, Zhu et al. (2013) explore path-dependencies in dynamic capabilities for environmental management systems and totalquality environmental management in termsof learning from the experience with otherorganizational systems such as ISO 9000.
The dynamic capabilities perspective is anintegrative approach to understand sources of competitive advantage (Teece et al., 1997). As we supported that a proactiveenvironmental strategy may be understoodas a dynamic capability, it has the ability toimpact the resource base of a firm to safeguard competitive positioning (Hart, 1995;Aragon-Correa and Sharma, 2003). Particularly, a proactive environmental strategy ischaracterized by pollution prevention andproduct stewardship approaches (Hart, 1995;Sharma and Vredenburg, 1998). Pollutionprevention affords opportunity for sustainedcompetitive advantage through the accumulation of tacit resources embedded in largenumbers of people (Hart, 1995, p. 1000). Onthe other side, product stewardship affords afirm the opportunity for sustained competitive advantage through the accumulation of
socially complex resources involving fluid
communication across functions, departments, and organizational boundaries (Hart,1995, p. 1001). The literature has suggested the term “eco-competitiveness”, referredalso as environmental competitiveness oreco-advantage (Esty and Winston, 2006),and understood as the share of the overall
competitiveness of the firm, which can beinfluenced by environmental management
activities (Wagner and Schaltegger, 2004).
The contribution of a proactive environmental strategy to such eco-competitiveness hasbeen studied in terms of costs and differentiation (Lopez-Gamero et al., 2009). AsShrivastava (1995) has shown, in the inputsystem, competitive advantage from environmental technology appropriation stems frommaterials and energy conservation. In thethroughput system, manufacturing for the en
vironment improves production efficiencies
and minimizes waste and pollution, which is
important both for the company’s image and
to minimize environmental liabilities. Thus, cost savings relative to competitors resultfrom reducing costs of implementing regulations as well as the avoidance of installingand operating end-of-pipe solutions since thefirm engages in continuous total quality environment management programs rather thancontrol mechanisms (Hart, 1995; Sharma andVredenburg, 1998). Empirically, Christmann(2000) finds support for the association between a firm’s use of pollution prevention
technologies and the cost advantage it gainsfrom a proactive environmental strategy.
On the other hand, the pollution preventionapproach of a proactive environmental strategy has the potential to improve employeemorale and labor productivity (Klassen andWhybark, 1999; Ambec and Lanoie, 2008).Hence, costs of recruitment, turnover and absenteeism are subject of reduction (Ambecand Lanoie, 2008). Additionally, a proactiveenvironmental strategy implies strong man
agerial practices that allows a firm to meet
the requirements of the regulations that areapplicable (Bansal and Hunter, 2003). Thatresults in additional cost savings as there arebetter relationships with the regulator and
other stakeholders, which are reflected in less
frequent environmental inspections from the
regulation, and fewer fines and penalties that
could take place (Bansal and Hunter, 2003;Lo et al., 2012).
Similarly, the differentiation advantage mayarise from higher revenues that are derived
from meeting the customer’s environmental
needs through eco-design, building productposition and customer loyalty on green attributes (Esty and Winston, 2006). However,while differentiation advantage typically
arises from the customer’s willingness to pay
more for the product or service if they believethat it is more valuable, this type of advantage usually depends on the fit of the product’s characteristics, the market needs and the company’s ability to credibly communicatethe product’s environmental characteristics
(Reinhardt, 1999; Galdeano-Gómez, 2008).
Furthermore, differentiation benefits include
legitimacy and improved corporate image
that allow the firm to experience preferential
treatment from customers and other stakeholders (Sharma and Vredenburg, 1998). Asimilar argument leads Hart (1995, p. 994)to argue that “competitive advantage mightbest be secured initially through competitive preemption.” That is, advantage can beachieved either by gaining preferred or exclusive access to raw materials, locations, productive capacity, or customers or by establishing rules, regulations, or standards
tailored to the firm’s capability (Hart, 1995,
pp. 994-995). Thus, through differentiation,a proactive environmental strategy allows thefirm to create more opportunities for business growth, increase of sales and profit by
exploring new markets “that are untappedand where competition is scarce” (Mengucet al., 2010, p. 287).
In summary, a dynamic capability of proac
tive environmental strategy stimulates firms
to generate high margin products by implementing cutting-edge technologies which canenhance profit growth (Menguc et al., 2010).This implies the mobilization and alterationof the resource base so that the firm can realize rent generations and improved competitive position. Therefore, we formulate thefollowing hypothesis regarding the outcomeof a proactive environmental strategy:
Hypothesis 1: A dynamic capability of proactive environmental strategy exerts a positive influence on the firm’s competitive advantage.
As mentioned above, dynamic capabilities allow addressing complex and changingenvironments. An important argument herepoints to the ability of dynamic capabilitiesto confer competitive advantage and improve
firm performance under these conditions of
shifting environments (Teece et al., 1997).That is, firms face fast rates of change, unexpected discontinuities and unpredictable events that require the reconfiguration of operational capabilities else they will be erodedand become core rigidities. The developmentof dynamic capabilities implies “enablingand inhibiting variables within and outside
the firm” (Ambrosini and Bowman, 2009, p.
46). Thus, the conditions of the external environment moderate the relationship between
dynamic capabilities and firm performance
(Eisenhardt and Martin, 2000; Zahra et al., 2006; Ambrosini and Bowman, 2009).
A stream of literature addresses different dimensions of the external business environment in order to understand the role and nature of dynamic capabilities, while givingspecial attention to characteristics of the industry. An early examination of the survivalin the typesetting industry illustrates thata dynamic technical capability allows the
firm to survive and adapt when confronted
with radical, competence destroying technological change in the business environment(Tripsas, 1997). Subsequent research in the
film industry indicates that the successfulimpact of dynamic capabilities on firm performance is determined by characteristics ofthe industry, such as the level of demand andstability of consumer tastes (Shamsie et al., 2009). Recently, Wilden et al. (2013) foundthat dynamic capabilities exert a positive influence on firm performance when “accounting for context dependencies” (Wilden et al., 2013, p. 87), such as the level of competitiveintensity.
In summary, the understanding of how dy
namic capabilities favor firm performance
when addressing the external business environment is consistent with the contingency theory (Burns and Stalker, 1961). That is,competitive advantage builds on the properalignment of endogenous variables with exogenous context variables (Lawrence andLorsch, 1967).
Empirical research subscribed perspectiveevidences, the role of the business environment as a moderator is the relationshipbetween organizational strategies and performance (Prescott, 1986; Venkatramanand Prescott, 1990; Mcarthur and Nystrom,1991). In particular, this stream agrees uponthree general dimensions of the businessenvironment, namely uncertainty or dyna
mism, munificence and complexity (Dess
and Beard, 1984; Boyd, 1990; Mcarthur andNystrom, 1991).
Environmental uncertainty is defined as the
perceived inability to predict the change andcharacteristics of the business environment accurately and the impact on organizationaldecisions due to the lack of sufficient information about external events (Duncan,1972; Milliken, 1987; Lewis and Harvey,2001). The literature discusses a variety ofrelated terms such as dynamism, volatility,and high-velocity, which to some extent refer to the same notion of unpredictability ofchange (Goll and Rasheed, 2004). Ambrosiniand Bowman (2009) note that as dynamiccapabilities impact the resource base of a
firm that result in competitive advantages,
the uncertainty of the business environmentdetermines whether these advantages aretemporary or sustained. That is, “dynamic capabilities are contingent on both environmentdynamism [uncertainty] and on managers’interpretations of their business environment” (Ambrosini and Bowman, 2009, p. 41). We,however, recognize that munificence, complexity, and elements of the business environment other than uncertainty are relevantin order to understand the nature of dynamiccapabilities but we have not discussed themin detail since they are outside the scope ofthis research.
Despite the significant advancement in thisfield, it is concluded that more research in
the contingency approach is needed to analyze internal and external contingencies inthe study of dynamic capabilities (Barreto,2010). This will certainly contribute to understand the context dependency in the competitive value of dynamic capabilities (Winter, 2003; Barreto, 2010).
In the context of environmental management,Aragón-Correa and Sharma (2003) elaborateon the contingency perspective and suggest
that uncertainty, complexity and munificenceinfluence the development of a proactive environmental strategy as a dynamic capabilityand the firm’s ability to improve competitiveness from such a dynamic capability. Theirargument leads to two sets of propositions.First, dimensions of the external business environment moderate the relationship between
firm capabilities and proactive environmental
strategy. Second, dimensions of the businessenvironment moderate the relationship between proactive environmental strategy andcompetitive advantage.
On the one hand, concerning the first set of
propositions, the extant literature suggeststhat firms facing uncertain business environments tend to take more risks and be more
proactive. Therefore, such firms are more
likely to make investments in developingthe necessary resources and capabilities thatlead to a proactive environmental strategy(Aragon-Correa and Sharma, 2003). Thisimplies the consultation with stakeholders and to shape administrative processesand structures to explore innovative waysof coping with such unpredictable externalchanges (López-Gamero et al., 2011a). Bydoing such investments in resources andcapabilities, firms “attempt to anticipateevents and implement preventive actionsrather than merely respond to events thathave already occurred” (Aragon-Correa andSharma, 2003, p. 77). Research has been particularly active regarding this area, includingthe empirical testing of Aragón-Correa and
Sharma’s (2003) propositions by Sharma et al. (2007), Rueda-Manzanares et al. (2008),López-Gamero et al. (2011a), and López-Gamero et al. (2011b).
On the other hand, in their second set of propositions, Aragon-Correa and Sharma (2003,
p. 77) state that differentiated structures andintegration of firms under uncertain environmental conditions allow them to “achieve stability by reducing the risk of concentrating on a single product or market segment”.Along with Ambrosini and Bowman (2009),these authors claim that to the extent that a proactive environmental strategy is understood as a dynamic capability, it will thenlead to competitive advantage depending onthe level of perceived uncertainty in the business environment.
Empirical studies in business and the naturalenvironment explore contingencies in the ex-
ternal environment. Russo and Fouts (1997)found that higher levels of industry growth
make a stronger influence of environmentalperformance on firm profitability. They argue
for the opportunities to reduce risk, the rapidmaturation of a technology, and the expectedorganic structures to be in place under suchconditions (Russo and Fouts, 1997). On theother hand, Goll and Rasheed (2004) evidenced that in more uncertain environments,
social responsibility exerts a higher influenceon financial performance. That is, firms seek
social legitimacy that “provides them withsome protection from the unpredictabilitiesthey face” (Goll and Rasheed, 2004, p. 44).However, empirical literature that supportsthe moderating role of environmental uncertainty on the relationship between a proactiveenvironmental strategy and competitive advantage remains absent. Recently, Mengucet al. (2010) studied the direct effects of environmental uncertainty on a proactive en
vironmental strategy and firm performance,
respectively. Interestingly, their results indicate that environmental dynamism exerts a
negative influence on sales growth.
We thus build on the above-mentioned arguments on the opportunities that uncertainenvironments offer to develop innovativeapproaches to deal with the natural environment and achieve competitive advantage.Thus, we formulate the following hypothesis:
Hypothesis 2: Perceived uncertainty in the business environment moderates the relationship between a dynamic capability of proactive environmental strategy and competitive advantage; the higher the perceived uncertainty, the stronger the impact of a dynamic capability of proactive environmental strategy over competitive advantage.
Jointly with Moreno et al. (2013), data collection in this study follows a web surveystrategy, using a questionnaire directed toenvironmental managers or their equivalent
from Bogotá-based firms. At the time thesurvey was conducted, targeted firms wereparticipating mostly in the first or secondlevels (out of five) of the “Gestión Ambiental Empresarial” (Corporate EnvironmentalMangament, or CEM) program. The CEMprogram is an assistance-and-education initiative (see Parker et al., 2009 about this type of programs in general) intended to
engage firms from Bogotá in environmental
improvement, and is currently developed by
the Bogotá’s Secretary of the Environment
addressing these firms in the study, we make
sure that they are in the process of responding to environmental issues throughout thegradual implementation of both engineeringand management practices.
The survey was directed to a pre-recruited,non-probabilistic panel (Couper, 2000) consisting of 360 potential responders. Afterconducting the necessary procedures for
verification of the quality of the data in web-
based studies (Sax et al., 2003; Gosling et al., 2004), 167 questionnaires were retainedfor subsequent analysis, out of 189 questionnaires completed. Next, we performed ananalysis for non-response bias by comparing both responders and responses across threeselected waves in a cumulative response ratefunction (Armstrong and Overton, 1977) fora six-month interval. We found no statistically significant differences between the re-sponders’demographics and their responses.
Finally, we examined our sample to identifymissing data and apply remedies accordingly(Hair et al., 2010). After analyzing missingvalues in homogenous blocks of variables,we excluded five cases and imputed onescore for an additional case using a regression method. Thus, we retained 162 cases for subsequent analysis.
In terms of size, 33 firms (20.4%) employ 10employees or less, –which classifies thesefirms as “micro-enterprises” according to
Colombian law. We decided to exclude these
cases from our final study sample, basedchiefly on the reasons reviewed in Tilley
(1999) and Mir and Feitelson (2007), namely,that voluntary action in micro-enterprises isunlikely as environmental awareness or eco
literacy are low in their owners, financial
and human resources are limited, and most regulatory or voluntary initiatives require aformal environmental management structure
more typical of larger firms.
In summary, our definitive sample included129 firms: 55 (43%) firms with a number ofemployees between 11 and 50; 48 (37%) between 51 and 200, and 26 (20 %) with more
than 200 employees. Of these cases, 100
firms (77.5%) belong to the manufacturingindustry, and the remaining 29 firms (22.5%)
belong to other industries, such as servicesand commerce (chiefly, health services,waste management, and logistic activities).
Our scale items were measured using Likertscales. The validity of the instruments wasevaluated through Exploratory PrincipalComponent Analysis (EPCA) with varimaxrotation, and the usual tests (Hair et al., 2010)were performed on the factors obtained,specifically, the calculation of reliability
estimates (i.e. Cronbach’s alpha). Data on
the items retained, their factor loadings, andthe percentage of the variance explainedby each factor are presented in Appendix
A. Following Walls et al. (2011), we drawfrom the relevant literature so as to capturein our measures environmental strategy in the form of management practices, initiatives, and technologies, deriving competitiveadvantage from such strategy, and not fromenvironmental performance, thus assumingthat the relationship between environmental
and financial performance may be explained
by environmental strategy (Claver-Cortés et al., 2005).
Proactive Environmental Strategy. Eightitems, adopted from Aragón-Correa (1998),Christmann (2000), Zhu and Sarkis (2004),Chan (2005), and Aragón-Correa et al. (2008), assess the degree of adoption of proactive environmental practices, initiatives
and technologies, using a five-point Likert
scale (“1 = we have not considered this issueat all” to “5 = we are leaders in this practicein our sector”). The EPCA analysis indicated
that all items were retained in two first-order
factors, which we labeled “Environmental Management Practices” (ENMP) and “Process & Product-related Environmental Prac
tices” (PPEP) (Cronbach’s alpha = 0.816, and
0.763, respectively). When these two factorsare complemented with good housekeepingpractices (which we did not include in ourmeasures for proactiveness), such extendeddistribution of environmental practices isfound to be consistent with other studies that characterize three general dimensionsof an environmental technology portfolio(e.g., Klassen and Whybark, 1999; Buysseand Verbeke, 2003; Gavronski et al., 2012).
Environmental Competitiveness (Eco-Advantage). Eight items, partly adapted fromSharma and Vredenburg (1998), Christmann(2000), and Karagozoglu and Lindell (2000),assess the impact of environmental management activities on costs, revenues, and differentiation opportunities through a seven-pointLikert scale (“1 = very unfavorable” to “7 =very favorable”). Exploratory factor analysisshowed that six of these items were retained
in two first-order factors, which we labeled
“Cost Advantage” (CADV) and “Differentia
tion Advantage” (DADV) (Cronbach’s alpha
= 0.695, and 0.757, respectively).
Perceived Environmental State Uncertainty.
Among the three types of perceived uncertainty that are generally recognized in theliterature (Milliken, 1987), we operationalizemeasures for environmental state uncertainty,which “occurs when managers perceive theirgeneral business environment or one of itscomponents to be unpredictable” (Aragón-Correa and Sharma, 2003, p. 77). Sevenitems, adapted from Chan (2005), Kemp(1998), and López-Gamero et al. (2011b),evaluate how predictable or unpredictablemay be a series of issues that might arise in
the business environment of the firm in the future through a five-point Likert scale (“1 =
completely unpredictable” to “5 = completely predictable”). All items were retained in
two first-order factors which, following Chan
(2005), we labeled “Environmental Products,Markets and Demand” (PU-EPMD) and “Environmental Resources and Services Used by
the Organization” (PU-ENRS) (Cronbach’s
alpha = 0.863, and 0.870, respectively).
To test our hypotheses, we performed structural equation analyses of interaction effects –between proactive environmental strategyand environmental state uncertainty, in whichboth independent variables involved in theinteraction are first-order latent constructs inferred from multiple indicators. Schumackerand Lomax (2010, p. 327) argue that whileseveral multiple regression studies have usednonlinear and interaction effects, these effects have been rarely tested in path models.For continuous observed variables, a nonlinear relationship could exist for a product oftwo observed variables, and since Baron and Kenny (1986), and even before (see discussion in Baron and Kenny, 1986, p. 1174), thishas been the preferred approach for testingmoderation effects.
A moderator can be seen as “a qualitative orquantitative variable that affects the directionand/or strength of the relation between an independent or predictor variable and a dependent or criterion variable” (Baron and Kenny,1986, p. 1174). Drawing from the seminalapproach established by these authors, themodel in Figure 1 shows how the impact ofproactive environmental strategy (predictor)
Figure 1. Conceptual model with the hypothesized moderation effect of perceived environmental state uncertainty
Source: The authors based on Aragón-Correa and Sharma (2003).
on competitive advantage (outcome) mayvary depending on perceived environmentalstate uncertainty (moderator). The moderating effect in this model is captured by theinteraction or product of the predictor andmoderator variables.
We follow the protocol of most prior stud
ies in treating ordinal variables with five or
more categories as continuous variables,drawing from evidence that suggests thatthis is not likely to have a considerable practical impact on the results (e.g. Johnson andCreech, 1983). And, from among the variousapproaches to estimating this type of interaction effects, while noticing that “best practice is still evolving” (Marsh et al., 2012, p.438), we estimate our models in LISREL 8.8through the partially constrained approach (Marsh et al., 2006).
However, for purposes of preliminary analysis (see Marsh et al., 2006, p. 230), we estimate our hypothesized models in LISREL 8.8 following the latent variable approach (also known as factor score approach) tointeraction effects proposed by Schumacker(2002). Here, the latent interaction variable
is defined by multiplying the latent variable
scores of the exogenous latent independentvariables (Schumacker, 2002, p. 40).
Table 1 shows the means, standard deviations
and correlations for the variables (first-order
factors). Table 2 presents the T-values for theinteraction effects and their associated sta
tistical significance for each of eight models
that correspond to our research hypotheses.Four models (i.e., models 1, 3, 5, and 7 in Table 2) evaluate the relationship between twotypes of proactive environmental strategyand differentiation advantage, including themoderating effects of two types of perceivedenvironmental state uncertainty. Complementary, four additional models (i.e., models2, 4, 6, and 8) evaluate the relationship between two types of proactive environmentalstrategy and cost advantage, including the
Table 1. Means, standard deviations and correlations
|1. Size (Employees)||211.03||431.42||1.000|
|2. Cost advantage||4.64||.96||-.048||1.000|
|3. Differentiation advantage||5.06||1.10||.064||.412**||1.000|
|4. Process and product-related environmental practices||3.04||.74||-.057||.227**||.437**||1.000|
|5. Environmental management practices||2.91||.85||.102||.380**||.409**||.512**||1.000|
|6. Perceived uncertainty - Environmental products, markets and demand||3.58||.93||-.034||.161||.360**||.334**||.359**||1.000|
|7. Perceived uncertainty - Environmental resources and services||3.95||.73||.005||.159||.282**||.222*||.285**||.627**||1.000|
*p < .05; **p <.01. Correlations were obtained from summated scales (average), which imply that lower values were obtained for
these coefficients compared to those obtained after correlating independent (latent) variable scores in Lisrel. Number of cases = 129.
Source: own research.
Table 2. Statistical significance for interaction effects in latent variable interaction models
|Model||(1) Eco-Advantage (dependent variable)||(2) Proactive Environmental Strategy (independent variable)||(3) Perceived Environmental State Uncertainty (moderator variable)||t-values* for interaction effects: (2) X (3)||Statistical significance of interaction effects (p-values)|
* Number of sampling distribution standard deviations the estimate is away from zero. In order to test the null hypothesis that thetrue parameter value is zero, we selected a desired level of significance (type I error) and used a normal probability table to obtain the corresponding critical value (Hayduk, 1988, p. 174).
** Except for these two direct effects of the moderator variable on the dependent variable, all other effects of the independent and
moderator variables on the dependent variable are statistically significant at the 0.05-level and positive.
Source: own research.
moderating effects of two types of perceivedenvironmental state uncertainty.
Fit statistics are not shown in all models for the latent variable approach when they arejust identified and therefore yield a perfectfit. All items retained in the EPCA are used to make up for the latent variables. Althoughwe used normalized scores rather than the original data, we could not reject the assumption that a multivariate normal data distribu
tion may be violated. Accordingly, we fit our
measurement models to the normalized data using Robust Maximum Likelihood as ourestimation method (Jöreskog et al., 2001).
The results show no evidence for interaction effects in any of the models that includedenvironmental management practices. However, for all models we do observe a direct
and positive effect on firm performance of
the two dimensions of proactive environmental strategy. Given that our main purposewith this article is to provide an empirical
verification of the contingency approach to
dynamic capabilities, in the remaining wewill focus on a deeper evaluation of the threemodels for which we have found statistical evidence (at the 0.1-level or below) throughthe latent variable approach for the moderating effects of perceived environmental stateuncertainty on the relationship between proactive environmental strategy and competitive advantage.
As we referred already, we do so through theapplication of the partially constrained approach to structural equation models of latentinteraction. When there are multiple indicators of constructs, latent variable approaches offer “a much stronger basis” (Marsh et al., 2012, p. 438) for evaluating the underlyingfactor structure and providing more defensible interpretations of the interaction effects.Also, the partially constrained approach hasthe advantage of relaxing the assumption ofmultivariate normality of the data (Marsh et al., 2006, p. 255).
We use our original survey data to estimate the effect of the interaction between proactive environmental strategy (x1) andperceived environmental state uncertainty(x2) on competitive advantage (h). Here, wefollow the notation and procedure providedby Marsh et al. (2006, p. 241). In our data,the structural equation with the interactionterm is:
h = g1x1 + g2x2 + g3x1x2 + z (Equation 1)
where each of the latent variables h, x1 and x2 has three indicators. The interaction term in Equation 1 is formed by matched pairsof indicators (items) according to arbitraryand non arbitrary combinations (see below).However, while each of the first-order factors for PPEP and PU-ENRS consists of four indicators, the remaining PU-EPMD factorcontains three indicators.
From among several approaches available inthe literature to deal with this situation, we use item parceling, which is recommended when the interest of the researcher lies in modeling relations among the latent constructs (Bandalos and Finney, 2001; Little et al., 2002). Consequently, our matched product indicators are based on single indicatorsfrom the three-item factor PU-EPMD, and two single indicators plus one item parcel ineach of the factors PPEP and PU-ENRS. As noted by Marsh et al. (2006, p. 246; Marsh et al., 2012, p. 442), this strategy has the advantage of both using all the information available and do not reuse information. In determining our parcels, we follow the procedurerecommended in Little et al. (2002, p. 166).
After the parceling of items in each of thefactors consisting of four items, we are leftwith the same number of indicators (three)
for the two first-order latent factors for the
interaction term. This allows us to match the indicators in order of the reliabilities of the indicators (Saris et al., 2007) obtained
from Confirmatory Factor Analysis (CFA)
for each model, matching the items with thehighest reliability from one predictor to theitem with the highest reliability in measuringthe other latent predictor, and so on (Marshet al., 2012, p. 441). Brown (2006, p. 131)
explains that the squared factor loading canbe considered as an estimate of the indica
To avoid multicollinearity, we used mean-centered measures for the sets of observed
indicators. The fit of our models in CFA is
evaluated through the use of robust maximum likelihood statistics. For the purpose
of testing our research hypotheses, the finalspecifications for our models are provided
in Table 3. We evaluated the unidimensionality of the sets of indicators being parceled,a condition associated with the use of item parcels in studies where the interest is centered on the structural parameters (Bandalos
and Finney, 2001), finding that none of themodification indices was different than zero
and none of the absolute values in the matrix of standardized residuals for the indicators being parceled was above 2.58, accordingto the tests suggested in Vieira (2011, p. 61).
Table 3. Model specification for the evaluation of latent interaction effects
|Competitive Advantage||Proactive Environmental Strategy||Squared Multiple Correlation (from CFA)||Perceived Environmental State Uncertainty||Squared Multiple Correlation (from CFA)||Interaction Term|
Source: own research.
Cuad. admon.ser.organ. Bogotá (Colombia), 26 (47): 87-118, julio-diciembre de 2013
Statistics from CFA are shown in Table 4, indicating good fit for the measurement models. We evaluated the convergent validity of our measures in CFA by calculating boththe average variance extracted (AVE) forthe items loading on each of our constructsand construct reliability (CR). A good ruleof thumb for adequate convergence wouldbe an AVE of .5 or higher; complementary, aCR of .7 or higher suggests good reliability(Hair et al., 2010, p. 687). The values computed for the AVE and CR are shown in Appendix B and suggest adequate convergencefor our constructs.
Results from the estimation of Model 1 (seeTable 5) support the direct and positive effectof process and product-related environmentalpractices on differentiation advantage (Hypothesis 1); also, these results might suggestthat a positive moderation effect exists for theperceived uncertainty of environmental products, markets and demand on the relationshipbetween proactive environmental strategy and differentiation advantage, though thismoderating effect is not fully supported bythe significance level for the interaction effect. The fit indices for this model are c2 (62)= 80.009 (p = 0.0616), RMSEA = 0.0476,SRMR = 0.0686, NNFI = 0.965, and CFI =
0.967, which are indicative of good fit of the
model to the data.
We observe strong evidence in support forHypothesis 2 in Model 2, suggesting that thehigher the perceived uncertainty on the environmental resources and services used bythe organization, the stronger the impact ofprocess and product-related environmentalpractices on cost advantage. In contrast, thedirect effect of process and product-relatedenvironmental practices on cost advantage is
not significant in this model. The fit indices
are c2(62) = 71.569 (p = 0.190), RMSEA =0.0347, SRMR = 0.0668, NNFI = 0.956, and
CFI = 0.959, which suggests a very good fit.
In Model 4, the main effects are not statistically significant, while the interaction effect is statistically significant (p < .05), as
Table 4. Fit statistics from CFA for the measurement models
|Satorra-Bentler Scaled c2 (df) p-value||RMSEA||90% Confidence interval for RMSEA||GFI||AGFI||NFI||NNFI||CFI||IFI|
|Model 1||14.075 (24) .945||.0||(.0; .0113)||.974||.95||.978||1.00||1.00||1.00|
|Model 2||10.685 (24) .991||.0||(.0; .0)||.98||.962||.974||1.00||1.00||1.00|
|Model 4||17.579 (24) .823||.0||(.0; .0447)||.969||.942||.962||1.00||1.00||1.00|
Source: own research.
Table 5. Parameter estimates in structural models
|From||To||Standardized estimate||Std. error||t-value|
|Model 1||Process and product-related environmental practices||Differentiation advantage||.391||.135||2.891**|
|Perceived uncertainty - Environmental resources and services||Differentiation advantage||.305||.114||2.680**|
|Process and product-related environmental practices X Perceived uncertainty - Environmental resources and services||Differentiation advantage||.251||.152||1.649†|
|Model 2||Process and product-related environmental practices||Cost advantage||.088||.115||.762|
|Perceived uncertainty - Environmental resources and services||Cost advantage||.312||.135||2.306*|
|Process and product-related environmental practices X Perceived uncertainty - Environmental resources and services||Cost advantage||.684||.306||2.232*|
|Model 4||Process and product-related environmental practices||Cost advantage||.153||.129||1.187|
|Perceived uncertainty - Environmental products, markets and demand||Cost advantage||.224||.119||1.873†|
|Process and product-related environmental practices X Perceived uncertainty - Environmental products, markets and demand||Cost advantage||.372||.168||2.202*|
† p<.1; *p<.05; **p<.01
Source: own research.
shown in Table 5. Therefore, the higher theperceived uncertainty in environmental products, markets and demand, the stronger theimpact of process and product-related environmental practices on cost advantage. We
find no evidence of a significant direct effect
of process and product-related environmental
practices on cost advantage. The fit indices
for Model 4 are c2(62) = 74.824 (p = 0.127),RMSEA = 0.0402, SRMR = 0.0685, NNFI = 0.973, and CFI = 0.974, which jointly suggest
that the model fits the data very well.
Our study offers evidence to support theclaim that a dynamic capability of proactiveenvironmental strategy can explain rents andcompetitive advantage (Teece et al., 1997; Makadok, 2001). That is, competitive benefits (e.g., gaining preferred access to customers and commanding a premium priceon products) are likely to result from the development of more advanced environmental practices (see Popp, 2005) in a proactive en-
vironmental strategy, such as input substitu
tion, process modification, eco-design, and
green purchasing. While a thorough understanding of the relationship between a proactive environmental strategy and firm performance is lacking in the context of Colombian
firms, interesting insights emerge from the
resource-based view and the dynamic capabilities perspectives. They suggest that suchadvanced, environmentally proactive practices, require the adoption of a particular setof routines and operations (Aragón-Correaet al., 2008) that, in turn, depends on thecomplex coordination of human and technical skills (López-Gamero et al., 2009) and
fluid communication across organizational
boundaries (Hart, 1995), which are crucialfor meeting customer environmental needs.Thus, the positive implications of a proactive environmental strategy on competitiveadvantage supported by our findings indicate the ability that such a dynamic capabil
ity possess so as to purposefully reconfigureand affect the firm’s resource base (Zahra et al., 2006; Helfat et al., 2007).
Considering the type of competitive benefits
related to cost-advantage in our study, thereis indication that environmental managementpractices might serve as a way to lower laborcosts “by reducing the cost of illnesses, absenteeism, recruitment, and turnover” (Ambec and Lanoie, 2008, p. 57) and to increaseemployee awareness regarding their contribution to waste reduction, recycling, and thereduction of maintenance costs (Rondinelliand Vastag, 2000). Additionally, environmental management systems could enableco-operation between authorities and enterprises (Hamschmidt and Dyllick, 2001), thereby reducing the risk associated to thisrelationship (Bansal and Hunter 2003; Ambec and Lanoie, 2008; Lo et al., 2012).
Furthermore, our analysis allows the examination of a relevant aspect of proactive environmental strategy from a dynamic capability perspective (Aragon-Correa and Sharma,2003). That is, the ability of proactive environmental strategy to confer competitiveadvantage under conditions of shifting environments, characterized by unexpected discontinuities and unpredictable events (Teeceet al., 1997). In particular, we analyzed uncertainty of the business environment as acontingency that moderates the relationshipbetween a proactive environmental strategyand competitive advantage.
Definitions of environmental uncertaintybased on managers’ perceptions of the business environment “imply that firms respond
to a general environment as it is interpretedby the decision makers and that its unperceived characteristics do not affect either the decisions of the actions of management”(Aragón-Correa and Sharma, 2003, p. 76).In other words, exogenous factors affect
each firm differently, as they are moderated
by managerial perceptions; ultimately, thesuccessful performance of dynamic capa
bilities will depend on managers’ judgment
to determine what dynamic capabilities todeploy, and how and where (Ambrosini andBowman, 2009, p. 40).
On the one hand, we observe that elements of perceived environmental uncertainty re
lated to the extent to which a firm depends
on both natural resources and environmental services, moderate the relationship betweenprocess and product-related environmentalpractices and cost advantage. In the face ofgrowing pressure coming from internal andexternal stakeholders for improved environmental performance of products and servicesthroughout their life cycle, managers scan
their firm’s environment looking for answers
to three questions (Jabnoun et al., 2003):
(1) how important are these resources andservices for the firm, (2) what is their availability, and (3) to what extent is their controlcompeted between companies. In turn, uncertainty increases when the perception isthat the organization has no control of theseresources and services when they are not easily available and thus are highly competed(López-Gamero et al., 2011b).
Faced with greater uncertainty, managerscan opt for “building a high degree of adaptive capability” (Wang and Ahmed, 2007;cited in Ambrosini and Bowman, 2009, p.45). While this response is not exempt ofrisks, the argument from contingent theorywould suggest that in uncertain environmentsgreater structure differentiation and the use ofmore sophisticated integration devices paysoff (Lawrence and Lorsch, 1967; cited inAragón-Correa and Sharma, 2003). In particular, the development of such adaptive capability in the form of differentiated structures
for product redesign, process modification,
cross-functional coordination, and stakeholder integration at the supply chain leveland with external stakeholders (Hart, 1995;Sharma and Vredenburg, 1998; Christman,2000; Sarkis, 2012; Hart and Dowell, 2011)will be successful when competitors need toincur the costs of building and maintaining their own capacity to adapt the organization(Ambrosini and Bowman, 2009) to pressuresfrom stakeholders for an improved environmental performance.
The argument presented here is supported bytwo prescriptions provided by López-Gamero et al. (2011b) to managers facing this typeof uncertainty. They argue that “organizations must develop ways to exploit these re
sources, which other firms are also seeking,
if they want to ensure their own survival”,and also “develop and sustain effective relationships with their business environment”,
including cooperation with other firms and
keeping in touch with key stakeholders(López-Gamero et al., 2011b, p. 434).
On the other hand, our results show that elements of uncertainty related to how managers perceive changes in customer preferencesand the environmental strategy of competitors moderate the relationship between process and product-related environmental practices and cost advantage, and even betweenthe former and differentiation advantage.The need to respond to these changes will
lead some innovative firms to deploy and/or
develop their organizational resources andcapabilities to collaborate with regulators,facilitate alliances with community groupsand non-governmental organizations, obtainenvironmental information and distribute it among employees, communicate with stakeholders, and educate to and engage with consumers (López-Gamero et al., 2011b).
As Aragón-Correa and Sharma (2003, p. 78)have argued, in more uncertain business en
vironments firms will find it harder to obtain
the information they need to duplicate the environmental capabilities of their competitors.Vis-á-vis uncertain customer preferences andchanges in the environmental strategy ofcompetitors, intra- and inter-organizationalenvironmental capabilities involved particularly in product stewardship, may afford afirm the opportunity for sustained competitive advantage through the accumulation of socially complex resources involving fluid
communication across functions, departments, and organizational boundaries (Hart,1995, p. 1001; Shi et al., 2012).
Thus, the value of the dynamic capabilityof proactive environmental strategy stemsfrom collaboration in supply chain networks,given the possibility for inter-organizationallearning, which entails a problem solving
routine connecting the focal firm with its
suppliers and/or customers (Vachon andKlassen, 2008). Similarly, value stems fromstakeholder integration (Sharma and Vredenburg, 1998; Verbeke et al., 2006), whichrepresents “the ability to establish trust basedcollaborative relationships with a wide variety of stakeholders, especially those withnon-economic goals” (Sharma and Vreden
burg, 1998, p. 735) and helps build a firm’s
legitimacy to cope with uncertainty in itsbusiness environment (Goll and Rasheed,2004; Hart and Dowell, 2011).
We find it interesting to recall that none of our
models involving the environmental management practices (ENMP) construct offered evidence for interaction effects associated with perceived environmental state uncertainty.One possible explanation for this observationis found in Buysse and Verbeke (2003), who argue that environmental management standards and procedures such as the development of a written environmental plan or theimplementation of the ISO 14000 standarddo not demand performance beyond whatis required by environmental regulations.Similarly, Andrews et al. (2006) have shownthat the presence of management systems is
correlated with significant improvements in
the environmental impacts of unregulatedaspects of business, such as spill avoidanceor energy conservation, but that management systems do not correlate with reportedimprovements on regulated areas, such as airand water emissions. Seen in this light, environmental management practices should notbe assimilated to the dynamic capability ofproactive environmental strategy, and hencethe theoretical expectation of moderationeffects of perceived uncertainty would notapply to a model that includes an interactioneffect involving such practices.
Our research shows that the uncertainty per
ceived by managers in the firm’s business
environment moderates the link between a
firm’s proactive environmental strategy and
competitive advantage. To our knowledge, anempirical examination of Aragón-Correa and
Sharma’s (2003) proposition has remained
absent from the literature until now. Interestingly, we observe that interaction effects are
significant only in our models where process
and product-related environmental practicesare present, in contrast with those where environmental management practices are included, regardless of the dimension of perceived environmental uncertainty that is used
as a moderator of the relationship betweensuch practices and competitive advantage.
We believe that our findings are relevant for
the community of peers and practitionersalike. In responding to the call for greaterefforts needed “to incorporate both internaland external contingencies within analyses”of the performance effects of dynamic capabilities (Barreto, 2010, p. 277), our resultssuggest that the value of the dynamic capability of proactive environmental strategy isat least contingent upon the perceived uncer
tainty of the firm’s external environment in
two dimensions that have been previouslyrevised by López-Gamero et al. (2011b): inrelation to information uncertainty associatedwith changes in customer preferences andthe environmental strategy of competitors,
and to the extent to which a firm depends on
natural resources and environmental technology services.
The necessary validation of measurement instruments for a relatively unknown territorywithin the dynamic capability perspectivehas limited the amount of observed variables that formed the latent factors remaining in our model. We believe that in turn thisposes a limitation on the generalizability ofour results, as there still might be relevantdimensions of our measures that are not being empirically captured and which couldpotentially impact the stability of our results.Consequently, additional work should beconducted in our business context to validate the empirical content of each of these
constructs. Specifically, there is a need for
further discussion and testing of measures forcost advantage and differentiation advantage, ultimately aimed at the promise of superiorpredictive validity.
While our study provides some empiricalsupport for the contingent approach to dynamic capabilities advanced by the work ofWinter (2003) and Aragón-Correa and Sharma (2003), and adopted into the dynamic capabilities research agenda by Ambrosini andBowman (2009) and Barreto (2010), there is
still much to be done. For instance, Teece’s (2007) revisit to the definition of dynamic
capability states that “the ambition of the dynamic capabilities framework is nothing lessthan to explain the sources of enterprise-levelcompetitive advantage over time” (Teece,2007, p. 1320). On the one hand, this impliesa limitation in our study related to relyingon a cross-sectional data sample to evaluate a phenomenon that is dynamic in nature.And, on the other hand, it suggests that aninteresting extension of this study could bethe analysis of how the development of external contingencies (e.g., uncertainty in thebusiness environment) over time affects the role of proactive environmental strategy asa source of enterprise-level competitive advantage.
Additionally, when adopting the dynamiccapability perspective to characterize a proactive environmental strategy, there are implications on the firm’s resource base. Further research in the context of environmental management could explicitly study how
such reconfiguration of the firm’s resource
base actually takes place. In other words, aninteresting question to be answered is how a
firm’s resources are built and combined into
a proactive environmental strategy in order to face uncertain environments and maintain competitiveness.
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|EAD1. My revenues from selling usable wastes (cardboard, plastics, scrap) in comparison to those of my competitors||.853|
|EAD2. My relationship with the regulator in comparison to that of my competitors||.838|
|EAD3. My payroll costs in comparison to those of my competitors||.708|
|EAD4. The consumer’s willingness to pay a premium price for my products, provided that they outperform my competitors’ in terms of environmental performance||.834|
|EAD5. The possibility to penetrate new product niches or to make new businesses||.742|
|EAD6. My firm’s reputation||.734|
|EAD7. My raw materials (input) costs in comparison to my competitors’||(Not retained)|
|EAD8. My costs of environmental compliance in comparison to my competitors’||(Not retained)|
|Percentage of variance explained||65.470 %|
|PROACTIVE ENVIRONMENTAL STRATEGY (PES)||PPEP||ENMP|
|PES1. Have a handbook of procedures in place, which includes precise instructions about environmental operations in the production plant||.879|
|PES2. Have a risk insurance plan that accounts for environmental events||.786|
|PES3. Perform environmental audits||.760|
|PES4. Evaluate the environmental impact of our activities considering the whole life cycle of products||.647|
|PES5. Substitute polluting inputs||.809|
|PES6. Modify the design of our products to reduce their environmental impact||.730|
|PES7. . Modify our production processes to improve environmental performance||.704|
|PES8. Evaluate or select our suppliers, including environmental arguments as criteria||.701|
|Percentage of variance explained||62.323 %|
|ENVIRONMENTAL STATE UNCERTAINTY (ESU)||PU-ENRS||PU-EPMD|
|ESU1. The environmental impact of the products manufactured by my firm throughout their useful life||.861|
|ESU2. The environmental impact of the inputs used by my firm (e.g., energy and raw materials)||.802|
|ESU3. The availability of natural resources that are used up by my firm (e.g., water, vegetable raw materials, and mineral raw materials)||.795|
|ENVIRONMENTAL STATE UNCERTAINTY (ESU)||PU-ENRS||PU-EPMD|
|ESU4. The performance of available cleaner production technologies (e.g., pollution abatement efficiency, input requirements, and consequences on the quality of the products)||.744|
|ESU5. The environmental preferences of my customers||.915|
|ESU6. The market demand for environmentally-friendly products||.840|
|ESU7. The changes in the environmental strategy of my competitors||.729|
|Percentage of variance explained||75.910 %|
Source: own research.
|Model 1||Model 2||Model 4|
This study was funded by Convocatoria Nacional de Investigación - DIB 2008 – UniversidadNacional de Colombia. We are also grateful to the staff at Bogotá’s Secretary of the Environment for their continued support for this study.