The value of proacTive environmenTal sTraTegy: an empirical evaluaTion of The conTingenT approach To dynamic capabiliTies*

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:

*** 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:

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.

1. Theoretical foundations and research hypotheses

1.1. Dynamic capabilities and environmental management

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.

1.2. Environmental management and competitive advantage

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.

1.3. The business environment as a moderator

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.

2. Methodology

2.1. Data

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

( By

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).

2.2. Measures

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).

2.3. Methods

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

Proactive Environmental

Competitive Advantage

Strategy (Predictor)

(Outcome variable)

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

Mean s.d. 1 2 3 4 5 6 7
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)
1 DADV PPEP PU-EPMD 1.65 0.1
2 CADV PPEP PU-ENRS 2.71 0.01
3 DADV PPEP PU-ENRS 1.36 > 0.1
4 CADV PPEP PU-EPMD 2.46 0.02
5 DADV ENMP PU-EPMD 1.01 > 0.1
6 CADV ENMP PU-ENRS** 1.36 > 0.1
7 DADV ENMP PU-ENRS 1.34 > 0.1
8 CADV ENMP PU-EPMD** 0.04 > 0.1

* 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

tor’s reliability.

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
Model 1 EAD4 PES5-6 .507 ESU6 .781 (PES5-6)*(ESU6)
EAD5 PES8 .489 ESU5 .683 (PES8)*(ESU5)
EAD6 PES7 .473 ESU7 .591 (PES7)*(ESU7)
Model 2 EAD1 PES5-6 .514 ESU2-4 .817 (PES5-6)*(ESU2-4)
EAD2 PES7 .481 ESU1 .631 (PES7)*(ESU1)
EAD3 PES8 .474 ESU3 .568 (PES8)*(ESU3)
Model 4 EAD1 PES5-6 .524 ESU6 .769 (PES5-6)*(ESU6)
EAD2 PES8 .471 ESU5 .692 (PES8)*(ESU5)
EAD3 PES7 .474 ESU7 .595 (PES7)*(ESU7)

Source: own research.

Cuad. admon.ser.organ. Bogotá (Colombia), 26 (47): 87-118, julio-diciembre de 2013

3. Results

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.

4. Discussion

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.

Final remarks

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.


Ambec, S. and Lanoie, P. (2008). Does it pay to be green? A systematic overview. Academy of Management Perspectives, 22 (4), 45-62.

Ambrosini, V. and Bowman, C. (2009). What are dynamic capabilities and are they a useful construct in strategic management? International Journal of Management Reviews, 11 (1), 29-49.

Amit, R. and Schoemaker, P. J. H. (1993). Strategic assets and organizational rent. Strategic Management Journal, 14 (1), 33-46.

Andrews, R. N. L., Hutson, A. M. and Edwards Jr.

D. (2006). Environmental management under pressure: How do mandates affect performance? In C. Coglianese and J. Nash (Eds.), Leveraging the private sector: Management-based strategies for improving environmental performance. Washington, D.C.: Resources for the Future.

Aragón-Correa, J. A. (1998). Strategic proactivity

and firm approach to the natural environment.

Academy of Management Journal, 41 (5), 556

567. Aragón-Correa, J. A., Hurtado-Torres, N., Sharma,

S. and Garcia-Morales, V. J. (2008). Environ

mental strategy and performance in small firms:

A resource-based perspective. Journal of Environmental Management, 86 (1), 88-103.

Aragón-Correa, J. A. and Sharma, S. (2003). A contingent resource-based view of proactive corporate environmental strategy. Academy of Management Review, 28 (1), 71-88.

Armstrong, J. S. and Overton, T. S. (1977). Estimating Nonresponse Bias in Mail Surveys. Journal of Marketing Research, 14, 396-402.

Bandalos, D. L. and Finney, S. J. (2001). Item parceling issues in structural equation modeling. In

G. A. Marcoulides and R. E. Schumacker (Eds.),

New developments and techniques in structural equation modeling (pp. 269-296). Mahwah, NJ: Lawrence Erlbaum Associates, Inc.

Banerjee, S. B. (2001). Managerial perceptions of corporate environmentalism: Interpretations from industry and strategic implications for organizations. Journal of Management Studies, 38 (4), 488-513.

Bansal, P. and Roth, K. (2000). Why companies go green: A model of ecological responsiveness. Academy of Management Journal, 43 (4), 717-736.

Bansal, P. and Hunter, T. (2003). Strategic explanations for the early adoption of ISO 14001. Journal of Business Ethics, 46 (3), 289-299.

Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17 (1), 99-120.

Baron, R. M. and Kenny, D. A. (1986). The moderator-mediator variable distinction in social psychological research: Conceptual, strategic, and statistical considerations. Journal of Personality and Social Psychology, 51 (6), 1173-1182.

Barreto, I. (2010). Dynamic capabilities: A review of past research and an agenda for the future. Journal of Management, 36 (1), 256-280.

Bowen, F., Cousins, P., Lamming, R. and Faruk, A. (2006). Horses for courses: Explaining the gap between the theory and practice of green supply. In J. Sarkis (Ed.), Greening the Supply Chain. London: Springer-Verlag.

Boyd, B. (1990). Corporate linkages and organizational environment:A test of the resource dependence model. Strategic Management Journal, 11 (6), 419-430.

Brown, T. A. (2006). Confirmatory Factor Analysis for Applied Research. New York: The Guilford Press.

Burns, T. and Stalker, G. M. (1961). The management of innovation. Oxford: Oxford University Press.

Buysse, K. and Verbeke, A. (2003). Proactive environmental strategies:A stakeholder management perspective. Strategic Management Journal, 24 (5), 453-470.

Chan, R. Y. (2005). Does the natural-resource-based view of the firm apply in an emerging economy? A survey of foreign invested enterprises in China. Journal of Management Studies, 42 (3), 625-672.

Christmann, P. (2000). Effects of “Best Practices” of Environmental Management on Cost Advantage: The Role of Complementary Assets. Academy of Management Journal, 43 (4), 663-680.

Claver-Cortés, E., Molina-Azorín, J. F., Tarí-Guilló,

J. J. and López-Gamero, M. D. (2005). Environmental management, quality management and

firm performance, a review of empirical studies.

In S. Sharma and J. A. Aragón-Correa (Eds.),

Corporate environmental strategy and competitive advantage (pp. 157-182). Northampton, MA: Edward Elgar.

Colwell, S. R., and Joshi, A. W. (2013). Corporate ecological responsiveness: Antecedent effects of institutional pressure and top management commitment and their impact on organizational performance. Business Strategy and the Environment, 22 (2), 73-91.

Couper, M. P. (2000). Web surveys: A review of issues and approaches. Public Opinion Quarterly, 64 (4), 464-494.

Dess, G. G. and Beard, D. W. (1984). Dimensions of organizational task environments. Administrative Science Quarterly, 29 (1), 52-73.

Duncan, R. B. (1972). Characteristics of organizational environments and perceived environmental uncertainty. Administrative Science Quarterly, 17 (3), 313-327.

Eisenhardt, K. M. and Martin, J. A. (2000). Dynamic capabilities: What are they? Strategic Management Journal, 21 (10/11), 1105-1105.

Esty, D. and Winston, A. (2006). Green to Gold: How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage. New Haven and London: Yale University Press.

Galdeano-Gómez, E. (2008). Does an endogenous relationship exist between environmental and economic performance? A resource-based view on the horticultural sector. Environmental and Resource Economics, 40 (1), 73-89.

Gavronski, I., Klassen, R. D., Vachon, S. and Nascimento, L. F. (2012). A learning and knowledge approach to sustainable operations. International Journal of Production Economics, 1-10.

Gilley, K. M., Worrell, D. L., Davidson, W. N. and El-Jelly, A. (2000). Corporate environmental initiatives and anticipated firm performance: the differential effects of process-driven versus product-driven greening initiatives. Journal of management, 26 (6), 1199-1216.

Goll, I. and Rasheed, A. A. (2004). The moderating effect of environmental munificence and dynamism on the relationship between discretionary social responsibility and firm performance. Journal of Business Ethics, 49, 41-54.

González-Benito, J. and González-Benito, Ó. (2005). Environmental proactivity and business performance: An empirical analysis. Omega, 33 (1), 1-15.

Gosling, S. D., Vazire, S., Srivastava, S. and John,

O. P. (2004). Should we trust web-based studies? A comparative analysis of six preconcep-tions about internet questionnaires. American Psychologist, 59 (2), 93-104.

Hair, J. F., Black, W. C., Babin, B. J. and Anderson,

R. E. (2010). Multivariate data analysis (7th

ed.). Upper Saddle River, NJ: Prentice Hall. Hamschmidt, J. and Dyllick, T. (2001). ISO 14001

profitable? Yes! But is it eco-effective? Greener Management International, 34, 43-54.

Harrington, D. R., Khanna, M. and Deltas, G. (2008). Striving to be green: The adoption of total quality environmental management. Applied Economics, 40 (23), 2995-3007.

Hart, S. L. (1995). A natural-resource-based view of the firm. Academy of Management Review, 20 (4), 986-1014.

Hart, S. L. and Dowell, G. (2011). A natural-resource-based view of the firm: Fifteen years after. Journal of Management, 37 (5), 1464-1479.

Hayduk, L. A. (1988). Structural equation modeling with LISREL: Essentials and advances. Baltimore: John Hopkins University Press.

Helfat, C. E., Finkelstein, S., Mitchell, W., Peteraf, M., Singh, H., Teece, D. and Winter, S. G. (2009). Dynamic capabilities: Understanding strategic change in organizations. London: Blackwell.

Hunt, C. B. and Auster, E. R. (1990). Proactive environmental management: avoiding the toxic trap. Sloan Management Review, 31 (2), 7


Jabnoun, N., Khalifah, A. and Yusuf, A. (2003). Environmental uncertainty, strategic orientation, and quality management: a contingency model. Quality Management Journal, 10 (4), 17-31.

Johnson, D. R. and Creech, J. C. (1983). Ordinal measures in multiple indicator models: A simulation study of categorization error. American Sociological Review, 48, 398-407.

Jöreskog, K., Sörbom, D., du Toit, S. and du Toit,

M. (2001). LISREL 8: New Statistical Features.

Lincolnwood, IL: Scientific Software International, Inc.

Judge, J. R. and Douglas, T. J. (1998). Performance implications of incorporating natuarl environmental issues into the strategic planning process: an empirical assessment. Journal of Management Studies, 35 (2), 241-262.

Judge, W. Q. and Elenkov, D. (2005). Organizational capacity for change and environmental performance: an empirical assessment of Bulgarian firms. Journal of Business Research, 58 (7), 893-901.

Karagozoglu, N. and Lindell, M. (2000). Environmental management: Testing the win–win model. Journal of Environmental Planning and Management, 43 (6), 817-829.

Kemp, R. (1998). The diffusion of biological wastewater treatment plants in the Dutch food and beverage industry. Environmental and Resource Economics, 12 (1), 113-136.

King, A. A. and Lenox, M. J. (2001). Lean and green?An empirical examination of the relationship between lean production and environmental performance. Production and Operations Management, 10 (3), 244-256.

Klassen, R. D. and Whybark, D. C. (1999). The impact of environmental technologies on manufacturing performance. Academy of Management Journal, 42 (6), 599-615.

Lawrence, P. and Lorsch, J. (1967). Organization and environment: Managing differentiation and integration. Boston: Harvard University Graduate School of Business Administration Division of Research.

Lewis, G. J. and Harvey, B. (2001). Perceived environmental uncertainty: The extension of Miller’s scale to the natural environment. Journal of Management Studies, 38 (2), 200-233.

Linton, J. D., Klassen, R. and Jayaraman, V. (2007). Sustainable supply chains: An introduction.

Journal of Operations Management, 25 (6), 1075-1082.

Little, T. D., Cunningham, W. A., Shahar, G. and Widaman, K. F. (2002). To parcel or not to parcel: Exploring the question, weighing the merits. Structural Equation Modeling, 9 (2), 151-173.

Lo, C. K., Yeung, A. C. and Cheng, T. C. E. (2012). The impact of environmental management systems on financial performance in fashion and textiles industries. International Journal of Production Economics, 135 (2), 561-567.

López-Gamero, M. D., Claver-Cortés, E. and Molina-Azorín, J. F. (2011a). Environmental perception, management, and competitive opportunity in Spanish hotels. Cornell Hospitality Quarterly, 52 (4), 480-500.

López-Gamero, M. D., Molina-Azorín, J. F. and Claver-Cortés, E. (2009). The whole relationship between environmental variables and firm performance: Competitive advantage and firm resources as mediator variables. Journal of Environmental Management, 90 (10), 3110-3121.

López-Gamero, M. D., Molina-Azorín, J. F. and Claver-Cortés, E. (2011b). Environmental uncertainty and environmental management perception: A multiple case study. Journal of Business Research, 64 (4), 427-435.

Maas, S., Schuster, T. and Hartmann, E. (2012). Pollution prevention and service stewardship strategies in the third-party logistics industry: effects on firm differentiation and the moderating role of environmental communication. Business Strategy and the Environment.

Makadok, R. (2001). Toward a synthesis of the resource-based and dynamic-capability views of rent creation. Strategic Management Journal, 22 (5), 387-401.

Marsh, H. W., Wen, Z. and Hau, K.-T. (2006). Structural equation models of latent interaction and quadratic effects. In G. R. Hancock and R. O.

Mueller (Eds.), Structural Equation Modeling: A Second Course (pp. 225-265). Charlotte, NC: Information Age Publishing.

Marsh, H. W., Wen, Z., Nagengast, B. and Hau, K.

T. (2012). Structural equation models of latent interaction. In R. H. Hoyle (Ed.), Handbook of structural equation modeling (pp. 436-458). New York: The Guilford Press.

McArthur, A. W. and Nystrom, P. C. (1991). Environmental dynamism, complexity, and munificence as moderators of strategy-performance relationships. Journal of Business Research, 23 (4), 349-361.

Menguc, B., Auh, S. and Ozanne, L. (2010). The interactive effect of internal and external factors on a proactive environmental strategy and its influence on a firm’s performance. Journal of Business Ethics, 94 (2), 279-298.

Milliken, F. J. (1987). Three types of perceived uncertainty about the environment: State, effect, and response uncertainty. Academy of Management Review, 12 (1), 133-143.

Mir, D. F. and Feitelson, E. (2007). Factors affecting environmental behavior in micro-enterprises: Laundry and motor vehicle repair firms in Jerusalem. International Small Business Journal, 25 (4), 383-415.

Moreno-Mantilla, C. E., Romero-Larrahondo, P.

A. and Reyes-Rodríguez, J. F. (2013). Driving product stewardship: an empirical evaluation of the association between some form of LCA implementation and environmental strategy

choice in Colombian firms. Paper presented at the Vth International Conference on Life Cycle Assessment, CILCA2013, Mendoza, Argentina.

Parker, C. M., Redmond, J. and Simpson, M. (2009). A review of interventions to encourage SMEs to make environmental improvements. Environment and Planning C: Government and Policy, 27, 279-301.

Popp, D. (2005). Uncertain R&D and the Porter Hypothesis. Contributions to Economic Analysis & Policy, 4 (1), 1-14.

Prescott, J. E. (1986). Environments as moderators of the relationship between strategy and performance. Academy of Management Journal, 29 (2), 329-346.

Reinhardt, F. (1999). Market failure and the environmental policies of firms: Economic rationales for ‘beyond compliance’ behavior. J. Ind. Ecol., 3 (1), 9-21.

Reinhardt, F. L. (1998). Environmental product differentiation: Implications for corporate strategy. California Management Review, 40 (4), 43-ss.

Rondinelli, D. and Vastag, G. (2000). Panacea, Common Sense, or Just a Label? The Value of ISO 14001 Environmental management systems. European Management Journal, 18 (5), 499


Roome, N. (1992). Developing environmental management strategies. Business Strategy and the Environment, 1 (1), 11-24.

Rothenberg, S., Pil, F. K. and Maxwell, J. (2001). Lean, green, and the quest for superior environmental performance. Production and Operations Management, 10 (3), 228-243.

Rueda-Manzanares, A., Aragon-Correa, J. A. and Sharma, S. (2008). The influence of stakeholders on the environmental strategy of service firms: The moderating effects of complexity, uncertainty and munificence. [Article]. British Journal of Management, 19 (2), 185-203.

Russo, M. V. (2009). Explaining the Impact of ISO 14001 on Emission Performance: a Dynamic Capabilities Perspective on Process and Learning. Business Strategy and the Environment, 18 (5), 307-319.

Russo, M. V. and Fouts, P. A. (1997). A resource-based perspective on corporate environmental

performance and profitability. Academy of Management Journal, 40 (3), 534-559.

Saris, W. E., Batista-Foguet, J. M. and Coenders,

G. (2007). Selection of indicators for the interaction term in structural equation models with interaction. Quality and Quantity, 41 (1), 55-72.

Sarkis, J. (2012). A boundaries and flows perspective of green supply chain management. Supply Chain Management, 17 (2), 202-216.

Sax, L. J., Gilmartin, S. K. and Bryant, A. N. (2003). Assessing response rates and nonresponse bias in web and paper surveys. Research in Higher Education, 44 (4), 409-432.

Schumacker, R. E. (2002). Latent variable interaction modeling. Structural Equation Modeling, 9 (1), 40-54.

Schumacker, R. E. and Lomax, R. G. (2010). A Beginner’s Guide to Structural Equation Modeling. New York: Routledge.

Seuring, S. (2004). Industrial ecology, life cycles, supply chains: Differences and interrelations. Business Strategy and the Environment, 13 (5), 306-319.

Seuring, S. (2011). Supply chain management for sustainable products - insights from research applying mixed methodologies. Business Strategy and the Environment, 20 (7), 471-484.

Shamsie, J., Martin, X. and Miller, D. (2009). In with the Old, in with the New: Capabilities, Strategies, and Performance among the Hollywood Studios. Strategic Management Journal, 30 (13), 1440-1452.

Sharma, S. (2000). Managerial interpretations and organizational context as predictors of corporate choice of environmental strategy. Academy of Management Journal, 43 (4), 681-697.

Sharma, S., Aragón-Correa, J. A. and Rueda-Manzanares, A. (2007). A contingent resource-based view of proactive corporate environmental strat-

egy. Canadian Journal of Administrative Sciences, 24 (4), 268-283.

Sharma, S. and Vredenburg, H. (1998). Proactive corporate environmental strategy and the development of competitively valuable organizational capabilities. Strategic Management Journal, 19 (8), 729-753.

Shi, V. G., Koh, S. C. L., Baldwin, J. and Cucchiella,

F. (2012). Natural resource based green supply chain management. Supply Chain Management, 17 (1), 54-67.

Shrivastava, P. (1995). Environmental technologies and competitive advantage. Strategic Management Journal, 16(Special Issue: Technological Transformation and the New Competitive Landscape, Summer, 183-200.

Slater, S. F., Olson, E. M. and Hult, G. T. M. (2006). The moderating influence of strategic orientation on the strategy formation capability-performance relationship. Strategic Management Journal, 27 (12), 1221-1231.

Teece, D. J., Pisano, G. and Shuen, A. (1997). Dynamic Capabilities and Strategic Management. Strategic Management Journal, 18 (7), 509


Teece, D. J. (2007). Explicating dynamic capabilities: the nature and microfoundations of (sustainable) enterprise performance. Strategic Management Journal, 28 (13), 1319-1350.

Tilley, F. (1999). The gap between the environmental attitudes and the environmental behaviour of small firms. Business Strategy and the Environment, 8 (4), 238-248.

Tripsas, M. (1997). Surviving radical technological change through dynamic capability: Evidence from the typesetter industry. Industrial and Corporate Change, 6 (2), 341-377.

Vachon, S. and Klassen, R. D. (2008). Environmental management and manufacturing performance: The role of collaboration in the supply

chain. International Journal of Production Economics, 111 (2), 299-315.

Vachon, S., Klassen, R. D. and Johnson, P. F. (2001). Customers as green suppliers: Managing the complexity of the reverse supply chain. In J. Sarkis (Ed.), Greening Manufacturing: From Design to Delivery and Back. Sheffield, UK: Greenleaf Publisher.

Venkatraman, N. and Prescott, J. E. (1990). Environment-strategy coalignment: An empirical test of its performance implications. Strategic Management Journal, 11 (1), 1-23.

Verbeke, A., Bowen, F. and Sellers, M. (2006).

Corporate environmental strategy: Extending

the natural resource-based view of the firm, Atlanta, GA.

Vieira, A. L. (2011). Interactive LISREL in Practice: Getting Started with a SIMPLIS Approach. New York: Springer.

Wagner, M. and Schaltegger, S. (2004). the effect of corporate environmental strategy choice and environmental performance on competitiveness and economic performance: An empirical study of EU manufacturing. European Management Journal, 22 (5), 557-572.

Walls, J. L., Phan, P. H. and Berrone, P. (2011). Measuring environmental strategy: Construct development, reliability, and validity. Business & Society, 50 (1), 71-115.

Wang, C. L. and Ahmed, P. K. (2007). Dynamic capabilities: A review and research agenda. International Journal of Management Reviews, 9 (1), 31-51.

Wernerfelt, B. (1984). A resource-based view of the firm. Strategic Management Journal, 5 (2), 171-180.

Wilden, R., Gudergan, S. P., Nielsen, B. B. and Lings, I. (2013). Dynamic capabilities and performance: strategy, structure and environment. Long Range Planning, 46 (1-2), 72-96.

Winter, S. G. (2003). Understanding dynamic capabilities. Strategic Management Journal, 24 (10), 991-995.

Wu, Q., He, Q., Duan, Y. and O’Regan, N. (2012). Implementing dynamic capabilities for corporate strategic change toward sustainability. Strategic Change, 21 (5-6), 231-247.

Yang, M. G., Hong, P. and Modi, S. B. (2011). Impact of lean manufacturing and environmental management on business performance: An empirical study of manufacturing firms. Journal of Production Economics, 129, 251-261.

Zahra, S. A., Sapienza, H. J. and Davidsson, P. (2006). Entrepreneurship and dynamic capabilities: A review, model and research agenda. Journal of Management Studies, 43 (4), 917-955.

Zhu, Q. and Sarkis, J. (2004). Relationships between operational practices and performance among early adopters of green supply chain management practices in Chinese manufacturing enterprises. Journal of Operations Management, 22 (3), 265-289.

Zhu, Q. H., Cordeiro, J. and Sarkis, J. (2013). Institutional pressures, dynamic capabilities and environmental management systems: Investigating the ISO 9000 - Environmental management system implementation linkage. Journal of Environmental Management, 114, 232-242.

Appendix A. Factor loadings of the exploratory principal components analysis

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 %
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 %
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


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 %

Appendix B. Measures for convergent validity of the study’s constructs

Source: own research.

Model 1 Model 2 Model 4
CADV --.447 .706 .447 .706
DADV .528 .767 ----
PPEP .490 .742 .490 .742 .490 .742
PU-EPMD .685 .867 --.685 .867
PU-ENRS --.673 .859 --


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.