CHALLENGES OF THE “GREEN IMPERATIVE”: A NATURAL RESOURCE-BASED APPROACH TO THE ENVIRONMENTAL ORIENTATION-BUSINESS PERFORMANCE RELATIONSHIP

Bulent Menguc, Lucie K.Ozanne

Farhan AhmadAbdul SalamMubarak HussianWaqas Ahmad

Group members:

Core idea of article

Drawing on the natural-resource-based view (NBRV) of the firm, the authors test a model of the impact of the higher order construct (CSR, Entrepreneurship, Commitment to natural environment) of natural environmental orientation (NEO) on firm performance (profitability, sale growth and market share).

Introduction

Due to overpopulation, alarming global environmental issues, increasing industrialization, and the loss of the threatened habitats and species have threatened the business community and the current practices.

Thus, not only must the business community face the challenges of this green imperative but they must also capture the resources and develop the skills and capabilities to remain competitive in this new, dynamic and green environment.

Many scholars have proposed a variety of concepts to capture this phenomenon (the challenges posed by the natural environment) such as green orientation,enviropreneurial marketing,eco-emarketing orientation and corporate environmentalism etc.

But the literature in this area lacks strong theoretical grounding.

Purpose of this Study

To propose a higher order construct of

natural environmental

orientation (NEO).

Drawing on NRB theory,

researchers argue that these capabilities will

lead to competitive advantage

This article hypothesizes and

tests the relationship b/w

NEO and firm performance.

Entrepreneurship, CSR and

commitment to natural environment

Through Empirical Evidence

An overview of the NRBV (natural resource based view)

Researchers consider the NRBV of the firm as theoretical foundation.

RBV suggests that it is a firms bundle of resources rather than a product deployment of those resources that determines a firm’s competitive position.

Thus, the NRBV of the firm is an adaption of the RBV of the firm, made necessary because of the demands imposed by natural environment.

The green imperative

Complex, inter-related nature of environmental problems has challenged the business world… compelling them to response with innovative answers and strategies apart from environmental regulations.

Those responses include reducing waste and emissions, reducing and recycling solid waste, conserving energy and reducing business impacts on eco-systems.

Natural environmental orientation(NEO) and its components Researchers have identified and proposed a

high order construct of NEO that is composed of three core themes /first order factors namely: Entrepreneurship. CSR. Commitment to the natural environment.These resources have the capacity to transform

the org into a natural environmentally oriented organization that in return will increase organization’s performance.

Theoretical Background and hypothesis

Conceptual framework Drew on and extended Hart’s (1995)

conceptual framework of NRBV in the selection of 3 components of NEO.

Hart’s NEO components

• Pollution prevention.

• Product stewardship.

• Sustainable development.

This article

• CSR

• Entrepreneurship.

• Environmental commitment.

Conceptual framework

Entrepreneurship defined. Pro-activeness + risk + innovation. Reasons for selecting Entrepreneurship.

CSR defined. Reasons for selecting CSR.

Environmental commitment defined.

Hypothesis

Hypothesis 1: NEO is a higher order construct composed of three dimensions : a) entrepreneurship, b) CSR, c) Environmental commitment.

Hypothesis 2: NEO will be related positively to an org’s sales growth.

Hypothesis 3: NEO will be related positively to an org’s profit after tax.

Hypothesis 4: NEO will be related positively to an org’s market share.

Method

Measure development. Entrepreneurship was measured with a 9-

item,5 point scale (1= doesn’t describe the org, 5= definitely describe the org).

For CSR, CERES principles were utilized to develop 10-item, 5-point scale (1= strongly disagree, 5= strongly agree).

Commitment to natural environment was measured with 9-item,5-point scale model.

Sample and data collection. 485 Australian major manufacturing firm’s

were selected and questionnaires were sent with a response rate of 29 %(140).

Firms sectors were chemical/petroleum, beverage, tobacco, basic metals, machinery, textiles etc.

75 % firms have an environmental market share of 1-9 %.

Analysis and results

Hypothesis were tested using a higher order path analysis in LISREL 8.30.

Entreprenuership,CSR, and commitment to natural environment were significantly loaded on the high order construct of NEO…thus supporting hypothesis 1.

NEO was found to be negatively and significantly related to sales growth.

NEO was found to be positively and significantly related to profitability and market share…supporting hypothesis 3 and 4.

Table 2

Table 1

Discussion and implications

Relationship b/w NEO and selected performance measures was significant and positively related to firm’s profit and market share except sales growth.

Article’s results support the argument that sound environmental practices can be profitable, and help to set course for high business performance i.e. market share, sales growth in the long run, profitability.

Explanation for negative relationship b/w NEO and sales growth.

Article is the first study to explicitly test Hart’s (1995) theory of competitive advantage based upon the firm’s relationship to natural environment.

Further, article results support the NRBV of the firm.

Commitment to the natural environment was found to be the most important components in the high order construct of NEO with entrepreneurship and CSR next.

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