INTRODUCTION
Increasing social concerns about negative effects of human activities on the environment has led firms to use environmental strategies to obtain competitive advantage and sustainable development (Aragón-Correa & Sharma, Reference Aragón-Correa and Sharma2003; Ateş, Bloemhof, Raaij, & Wynstra, Reference Ateş, Bloemhof, Raaij and Wynstra2012; Hart, Reference Hart1995). Environmental strategies can be both proactive and passive. Proactive environmental strategies (PES) are voluntary environmental protection strategies beyond compliance with regulatory requirements (Aragón-Correa & Rubio-López, Reference Aragón-Correa and Rubio-López2007; Ateş et al., Reference Ateş, Bloemhof, Raaij and Wynstra2012). In contrast, passive environmental strategies are based on government regulations and strong stakeholder pressure. Firms that are focused on sustainable development are increasingly formulating and implementing PES (Aragón-Correa & Sharma, Reference Aragón-Correa and Sharma2003; Dahlmann & Brammer, Reference Dahlmann and Brammer2011; Hart, Reference Hart1995; Sharma & Vredenburg, Reference Sharma and Vredenburg1998).
What motivates PES? In the last two decades, many scholars from strategy, economics, organizational theory, policy, organizational behavior, operations, and other research areas have studied environmental issues based on various theories and paradigms in their respective domains (Etzion, Reference Etzion2007). However, the literature lacks a comprehensive theoretical framework to identify and explain the relationships between the most important antecedents and the adoption of PES.
The effectiveness of a firm's strategy depends on the specific national environment (Delmas & Montes-Sancho, Reference Delmas and Montes-Sancho2010; Escobar & Vredenburg, Reference Escobar and Vredenburg2011; Sharma, Reference Sharma2000). The national context is an important contingency (Maignan & Ralston, Reference Maignan and Ralston2002; Matten & Moon, Reference Matten and Moon2008): for both strategy formulation and implementation (Matten & Moon, Reference Matten and Moon2008; Peng, Reference Peng2002). Both historical and contemporary factors can change the effects of corporate responsibility toward the environment (Matten & Moon, Reference Matten and Moon2008). Specifically, firms in China operate under lower standards of environmental protection regulations than do firms in Western countries, and thus Chinese firms lack sufficient environmental protection motivation (Wright, Filatotchev, Hoskisson, & Peng, Reference Wright, Filatotchev, Hoskisson and Peng2005). Meanwhile, the Chinese holistic culture emphasizes balancing conflicting factors, such as economic and environmental performance, which deeply influences managers' strategic mindsets (Chen, Reference Chen2002). Thus, we argue that various traditional cultural and historical factors, and current market systems are responsible for PES differences between countries (Li & Peng, Reference Li and Peng2008; Peng, Reference Peng2002).
We identify, under the contrasting contexts of Western countries and China, three key factors that may have differential influence on PES: government regulations, stakeholder norms, and managers' mindsets. We conduct a meta-analysis to test our ideas.
This research will make two important contributions. First, the study delineates the important antecedents of PES and explains their different effects by synthesizing various insights and perspectives (Etzion, Reference Etzion2007). We develop theoretical relationships among the antecedents of government regulations, stakeholder norms, managers' mindsets on PES, and identify the effect of PES on firm's economic and environmental performance in both Western and Chinese businesses. This overarching framework explains why and how the antecedents have different influences on PES in the two contexts. We use the meta-analytic technique that allows a more comprehensive examination of the factors (Margolis, Elfenbein, & Walsh, Reference Margolis, Elfenbein and Walsh2007; Viswesvaran & Ones, Reference Viswesvaran and Ones1995). We compare PES in China and in Western countries using both historical factors (traditional cultures) and contemporary factors (current market environments). The second contribution is to resolve the inconsistent results on three antecedents – government regulations, stakeholder norms, and managers' mindsets – with PES and firm performance in the literature (Ateş et al., Reference Ateş, Bloemhof, Raaij and Wynstra2012; Kassinis & Vafeas, Reference Kassinis and Vafeas2009; Menguc, Auh, & Ozanne, Reference Menguc, Auh and Ozanne2010). One reason for these inconsistent empirical results could be due to samples from different nations (Chang, Reference Chang2011; Hofer, Cantor, & Dai, Reference Hofer, Cantor and Dai2011; Julian & Ofori-Dankwa, Reference Julian and Ofori-Dankwa2013). We integrate the naïve dialecticism perspective (Peng & Nisbett, Reference Peng and Nisbett1999; Spencer-Rodgers, Williams, & Peng, Reference Spencer-Rodgers, Williams and Peng2010) and the national business systems approach (NBSA) (Matten & Moon, Reference Matten and Moon2008) to theoretically explain how national cultures and market institution systems have different effects on the relationships among the antecedents, PES, and firm performance in Western countries and in China. The meta-analysis allows us to account for sampling and measurement error that might affect the results of any single study and can help us detect contextual factors that explain variability across findings (Crook, Ketchen Jr., Combs, & Todd, Reference Crook, Ketchen, Combs and Todd2008; Hunter & Schmidt, Reference Hunter and Schmidt1990).
THEORETICAL BACKGROUND AND HYPOTHESES
Scholars have offered various definitions of PES. It has been defined as intangible managerial routines and innovations that need organizational commitments to improve the natural environment, but that the laws do not require (Hart, Reference Hart1995). It also has been defined as comprising environmental objectives, plans, and procedures that go beyond basic legalities (González-Benito, Reference González-Benito2008). A third definition refers to systematic patterns of voluntary practices, such as reducing waste and preventing pollution at its source, beyond regulatory requirements (Aragón-Correa & Rubio-López, Reference Aragón-Correa and Rubio-López2007).
Building on these previous works, we define PES as firms' voluntary environmentally protective strategic plans and action arrangements that go beyond regulatory requirements. In firms with a high level of PES, top managers design and implement environmental protection plans, actions, and standards beyond legislative and industry standards, in the belief that the practices will benefit both the firms and the environment. Examples of PES include ISO 14001 certification (Christmann & Taylor, Reference Christmann and Taylor2001; Delmas, Reference Delmas2001; Russo & Harrison, Reference Russo and Harrison2005); recycling of resources or materials and using renewable sources (Chan, Reference Chan2005; Cordano & Frieze, Reference Cordano and Frieze2000; Fryxell & Lo, Reference Fryxell and Lo2003); utilizing eco-technical innovations (Berrone & Gomez-Mejia, Reference Berrone and Gomez-Mejia2009; Chang, Reference Chang2011; Christmann, Reference Christmann2000); establishing environmental cooperation with suppliers (Chan et al., Reference Chan, He, Chan and Wang2012; Zhu & Sarkis, Reference Zhu and Sarkis2004); adopting environmentally friendly products and processes (Klassen, Reference Klassen2001; Peng & Lin, Reference Peng and Lin2008; Vachon, Reference Vachon2007); implementing environmental policies (Darnall, Henriques & Sadorsky, Reference Darnall, Henriques and Sadorsky2010; González-Benito, Reference González-Benito2008; Klassen, Reference Klassen2001); and training employees in pro-environmental behavior (Clemens & Douglas, Reference Clemens and Douglas2006; Darnall et al., Reference Darnall, Henriques and Sadorsky2008, Reference Darnall, Henriques and Sadorsky2010). Proactiveness implies that the firm goes beyond government regulations and industry standards in implementing environmental strategies. However, whether environmental strategies are proactive depends on the legal environments governing the firms. Compared with firms in Western countries, China has lower environmental protection standards and incomplete government regulations (Christmann & Taylor, Reference Christmann and Taylor2001; Li & Peng, Reference Li and Peng2008). Thus, some Chinese firms that meet international environmental standards often employ more proactive environmental strategies compared with other Chinese firms that meet only local environmental standards. For example, China does not include chronic toxicity tests and endocrine disruptors in waste water monitoring, but this is compulsory in most Western governments (Hu et al., Reference González-Benito and González-Benito2011).
The purpose of PES is to create value for both shareholders and stakeholders by ensuring effective environmental protection (Darnall et al., Reference Darnall, Henriques and Sadorsky2010). Research has shown that PES improves firm performance (Aragón-Correa & Sharma, Reference Aragón-Correa and Sharma2003; Chan, Reference Chan2005; Darnall & Edwards, Reference Darnall and Edwards2006; Darnall et al., Reference Darnall, Henriques and Sadorsky2008; Florida & Davison, Reference Florida and Davison2001; King & Lenox, Reference King and Lenox2001, Reference King and Lenox2002; Klassen & Whybark, Reference Klassen and Whybark1999; Matten & Moon, Reference Matten and Moon2008; Zhu, Sarkis, & Lai, Reference Zhu, Sarkis and Lai2008).
The Antecedents of Proactive Environmental Strategies
Various disciplines have offered different theories and paradigms for identifying PES antecedents (Etzion, Reference Etzion2007). Most studies emphasize the role of governments (Clemens & Douglas, Reference Clemens and Douglas2006; Russo & Harrison, Reference Russo and Harrison2005), mainly through regulations (Clemens & Douglas, Reference Clemens and Douglas2006). Regulations include compulsory laws, rules, policies, and other coercive forces that administrations develop to protect the environment (López-Gamero, Claver-Cortés, & Molina-Arozín, Reference López-Gamero, Claver-Cortés and Molina-Arozín2009). Government-enforced laws and rules exert potential control on firms' PES (Powell & DiMaggio, Reference Powell and DiMaggio1991). On one hand, governments from China and Western countries incentivize proactive environmental protection (Liu, Liu, Shishime, Yu, Bi, & Fujitsuka, Reference Li, Lee, Li and Liu2010) to encourage firms to adopt, for example, ISO 14001 (Johnstone & Labonne, Reference Johnstone and Labonne2009). On the other hand, firms that adhere to the laws protect themselves from legal coercion and political risks, especially when the offenses are potentially costly (Berrone et al., Reference Berrone, Fosfuri, Gelabert and Gomez-Mejia2013). Thus, firms can improve their resource distribution and build their advantages by following regulations. Therefore, we posit the following hypothesis:
Hypothesis 1a: Environmental protection regulations in the focal company's home country will relate positively to the proactive environmental strategy of the focal company.
Society can influence PES through stakeholder norms (Darnall et al., Reference Darnall, Henriques and Sadorsky2010; Henriques & Sadorsky, Reference Henriques and Sadorsky1999). Stakeholder norms refer to external stakeholders' expectations regarding appropriate actions and legitimate behavior in particular organizational contexts (Scott, Reference Scott2001). Firms must build their reputation and maintain legitimacy through transparency and communication that invites external stakeholder scrutinization (Hart, Reference Hart1995; Suchman, Reference Suchman1995). The stakeholder norms may encourage firms to proactively implement PES (Sarkis, Gonzalez-Torre, & Adenso-Diaz, Reference Sarkis, Gonzalez-Torre and Adenso-Diaz2010). Proactively highlighting firms' eco-friendliness can enhance their market reputation (Lin & Ho, Reference Lin and Ho2011), and win support from increasingly ‘green’ consumers (Huang, Reference Huang2005; Peattie, Reference Peattie1992; Peng & Lin, Reference Peng and Lin2008). Similarly, suppliers may prefer to cooperate with manufacturers that have positive corporate images regarding environmental protection (Henriques & Sadorsky, Reference Henriques and Sadorsky1999). In addition, stakeholders, such as environmental and community organizations, labor unions, and industry associations may actively engage in public protests, strikes, and calls for industry engagement (Darnall et al., Reference Darnall, Henriques and Sadorsky2010; Sharma & Henriques, Reference Sharma and Henriques2005). Thus, firms with PES can acquire better social reputations (Delmas & Toffel, Reference Delmas and Toffel2004) and social legitimacy (Hoffman, Reference Hoffman1997). Therefore, we posit:
Hypothesis 1b: Stakeholder norms in environmental protection will relate positively to the proactive environmental strategy of the focal company.
Finally, when top managers have environmentally friendly strategic mindsets, firms may be motivated toward PES (Flannery & May, Reference Flannery and May2000; Marshall, Cordano, & Silverman, Reference Marshall, Cordano and Silverman2005), and will support PES (Lin & Ho, Reference Lin and Ho2011). Managers' perceptions, beliefs, expectations, and opinions determine the environmental practices firms adopt (Cordano & Frieze, Reference Cordano and Frieze2000; Cordano, Marshall, & Silverman, Reference Cordano, Marshall and Silverman2010; Flannery & May, Reference Flannery and May2000) and are positively associated with the speed of company responses to environmental issues (Bansal, Reference Bansal2003). Managerial mindsets also positively affect intentions to adopt environmental management programs (Cordano et al., Reference Cordano, Marshall and Silverman2010). Therefore, we posit:
Hypothesis 1c: Environmentally friendly mindsets of top managers in the focal company will relate positively to the proactive environmental strategy of the focal company.
National Context as a Contingency
The national business systems approach (NBSA) explains that political, financial, education, labor, and cultural systems formulate the historical national institutional framework (Matten & Moon, Reference Matten and Moon2008; Whitley, Reference Whitley1999). Generally, political, financial, education, and labor systems are included in Western environmental protection regulations (Darnall et al., Reference Darnall, Henriques and Sadorsky2010; Klassen & Vachon, Reference Klassen and Vachon2003; Zhou, Su, & Bao, Reference Zhou, Su and Bao2002). These systems follow efficient regulations and strengthen stakeholder norms. In contrast, China's systems are less developed (Chan, Reference Chan2005; Li & Peng, Reference Li and Peng2008; Wright et al., Reference Wright, Filatotchev, Hoskisson and Peng2005; Zhu & Sarkis, Reference Zhu and Sarkis2004). Between the two contexts, top managers will have different cognitions regarding environmental protection strategies because of the different regulation effects (Cordano, Marshall, & Silverman, Reference Cordano, Marshall and Silverman2010; Fryxell & Lo, Reference Fryxell and Lo2003). In Western countries, complete political, financial, education, and labor system regulations keep top managers from acting opportunistically. Thus, they will leverage PES to create new business and enhance competitiveness (Cordano et al., Reference Cordano, Marshall and Silverman2010). On the contrary, managers in Chinese firms, operating under incomplete national business systems, mainly focus on grasping political opportunities (Fryxell & Lo, Reference Fryxell and Lo2003).
Western countries and China have different cultural systems that may affect the relationships among the antecedents, PES, and firm performance. The naive dialecticism perspective (Peng & Nisbett, Reference Peng and Nisbett1999; Spencer-Rodgers, Williams, & Peng, Reference Spencer-Rodgers, Williams and Peng2010) suggests that Western dialectical thinking tends to be more synthetic, emphasizing the law of identity (everything must be identical to itself), the law of non-contradiction (the same thing cannot be both true and false), and the law of the excluded middle (everything is either true or false). Chinese dialectical thinking has three key principles: change (the universe is dynamic and constantly changing), contradiction (two ostensibly contradictory propositions may both be true), and holism (everything in the universe is connected) (Peng & Nisbett, Reference Peng and Nisbett1999). Thus, Western dialectical thinking is quite different from that of Chinese dialectical thinking.
By integrating the national business systems approach and the naive dialecticism perspective, we can explain how the key differences cause the antecedents to exert different influences on PES in firms from China and firms from Western countries.
Different influences of national contingencies on antecedents–proactive environmental strategy linkage. Western thinking is characteristically analytical, primarily focusing on objects and their categories, relying on formal logic to understand objects' behaviors (Chen, Reference Chen2002; Nisbett et al., Reference Nisbett, Peng, Choi and Norenzayan2001; Nisbett & Masuda, Reference Nisbett and Masuda2003), and regarding objects as separate and distinct (Nisbett & Masuda, Reference Nisbett and Masuda2003; Shafer, Fukukawa, & Lee, Reference Shafer, Fukukawa and Lee2007). Western dialectical thinking means that Western firms may regard regulations, stakeholder norms, and top managers' mindsets as three independent antecedents of PES. Thus they may analyze the attributes and the consequences of attention to the three factors separately and subsequently implement distinct efforts to achieve their strategies.
Western governments, as compared with China's government, have more complete environmental regulations (Escobar & Vredenburg, Reference Escobar and Vredenburg2011). Most Western firms adhere to strict and well-developed environmental legal systems that strongly control their environmental behaviors (Christmann & Taylor, Reference Christmann and Taylor2001). They face more pressure from political systems (Matten & Moon, Reference Matten and Moon2008), so in the Western context, high-level regulations have weaker marginal effects on PES.
Stakeholder norms affect PES mainly through external stakeholders such as customers, suppliers, and the public (Darnall, Henriques, & Sadorsky, Reference Darnall, Henriques and Sadorsky2010). In Western countries, many stakeholders are different from legislation that constrains all firms equally, and different stakeholders may have different influences on firms' environmental protection behaviors, so that firms can be either reactive or proactive depending on different stakeholder expectations and demands (Clarkson, Reference Clarkson1995; Darnall, Henriques, & Sadorsky, Reference Darnall, Henriques and Sadorsky2010; González-Benito & González-Benito, Reference González-Benito and González-Benito2006). As the public becomes increasingly knowledgeable about environmental protection, stakeholder norms exert increasing demands (Darnall, Henriques, & Sadorsky, Reference Darnall, Henriques and Sadorsky2010) so that stakeholders' evaluations provide opportunities for firms to improve firm reputations by leveraging PES. Unlike pressure from regulations, stakeholder norms offer more incentives to leverage PES (Huang, Reference Huang2005; Peng & Lin, Reference Peng and Lin2008).
Finally, under Western political, education, and labor systems, firms are likely to strengthen PES, depending on managers' beliefs, expectations, and perceptions (Banerjee, Reference Banerjee2001). The Western emphasis on independence leads them to focus primarily on personal achievements (Nisbett & Masuda, Reference Nisbett and Masuda2003; Shafer, Fukukawa, & Lee, Reference Shafer, Fukukawa and Lee2007). In an individualist culture focused on personal achievements, managers strongly devoted to environmental protection may emphasize PES as a personal accomplishment that wins market advantage (Shafer, Fukukawa, & Lee, Reference Shafer, Fukukawa and Lee2007). For instance, firms whose managers have strong environmentally friendly mindsets can implement higher PES standards to win competitive advantage over rival firms whose managers are less devoted to environmental protection (Hart, Reference Hart1995). Meanwhile, a more efficient financial system ensures that top managers can obtain resources for implementing PES, which may strengthen the effect of the top manager's mindset. Therefore, we posit:
Hypothesis 2a: In Western firms, top managers' mindsets will have the strongest effect and regulations will have the weakest effect on the proactive environmental strategy of the focal company.
In contrast, Chinese naive dialecticism thinking embraces a holistic world view (Chen, Reference Chen2002), which holds that everything is connected. According to this view, regarding anything in isolation is misleading (Chen, Reference Chen2002; Peng & Nisbett, Reference Peng and Nisbett1999); rather, the whole is more than the sum of its parts (Peng & Nisbett, Reference Peng and Nisbett1999) and the parts cannot be understood except in relation to the whole. Thus, Chinese firms prefer to leverage the effects of regulations, stakeholder norms, and the mindsets of top managers on PES. Furthermore, most Chinese firms have collectivist culture stressing social harmony and protection of group interests (Shafer, Fukukawa, & Lee, Reference Shafer, Fukukawa and Lee2007; Su, Sirgy, & Littlefield, Reference Su, Sirgy and Littlefield2003), so they are more likely to be affected by informal professional, industrial, and organizational norms (Li, Lee, Li, & Liu, Reference Li, Lee, Li and Liu2010; Shafer, Fukukawa, & Lee, Reference Shafer, Fukukawa and Lee2007).
Furthermore, with poorly developed environmental regulations and relatively low environmental standards, the space for regulation improvement significantly affects PES in China. With rapid economic growth, people are increasingly paying attention to firms' CSR (corporate social responsibility) and environmental protection activities (Aguinis & Galvas, Reference Aguinis and Galvas2012; Lee, Reference Lee2011), which provides new opportunities for firms to leverage PES and enhance their reputation by meeting stakeholder demands (Chan et al., Reference Chan, He, Chan and Wang2012; González-Benito & González-Benito, Reference González-Benito and González-Benito2006). Moreover, top managers in China are influenced by the collectivist culture to comply with regulations and stakeholder norms. They prefer to comprehensively leverage the antecedents to educate their employees, enhance their reputations, and display their social responsibility to society (Shafer, Fukukawa, & Lee, Reference Shafer, Fukukawa and Lee2007). Therefore, we posit:
Hypothesis 2b: For firms in China, regulations, stakeholder norms, and the mindsets of top managers will have similar effects on the proactive environmental strategy of the focal company.
Different influences of national contingencies on proactive environmental strategy–performance linkage. The gold standard for evaluating any effective strategy is whether the strategy improves firm performance. Because firms have multiple objectives, they pursue multiple performance goals that include environmental performance based on environmental protection results and economic performance based on financial outcomes (Kassinis & Vafeas, Reference Kassinis and Vafeas2009; Schaefer, Reference Schaefer2007; Zhu & Sarkis, Reference Zhu and Sarkis2004). Environmental performance has been defined as the ecological results based on the impact that pollutants, such as plant emissions, have on the environment (Freedman & Jaggi, Reference Freedman and Jaggi1988； Klassen & Whybark, Reference Klassen and Whybark1999). That measure of environmental performance consists of objective measures, such as total emissions (Kassinis & Vafeas, Reference Kassinis and Vafeas2009; King & Lenox, Reference King and Lenox2002; Klassen, Reference Klassen2001), toxic releases or toxic release inventory (TRI) (Klassen & Whybark, Reference Klassen and Whybark1999; Russo & Harrison, Reference Russo and Harrison2005), pollution emissions (Berrone et al., Reference Berrone, Cruz, Gomez-Mejia and Larraza-Kintana2010; Lo, Fryxell, & Tang, Reference Lo, Fryxell and Tang2010), record of environmental protection activities (Branzei, Ursacki-Bryant, Vertinsky, & Zhang, Reference Branzei, Ursacki-Bryant, Vertinsky and Zhang2004), environmental regulatory compliance records (Chan, Reference Chan2005; Judge & Douglas, Reference Judge and Douglas1998), the number of cases or administrative actions against the firm for violating an environmental law, environmental accidents reports (Bansal & Clelland, Reference Bansal and Clelland2004; Kassinis & Vafeas, Reference Kassinis and Vafeas2009), frequency of environmental accidents (Zhu & Sarkis, Reference Zhu and Sarkis2004), and other environmental outcomes. Accordingly, environmental performance is a tangible output related to firm-level environmental management (Klassen, Reference Klassen2001).
Alarmed by deteriorating environmental conditions, scholars who hold the natural resource-based view argue that firms can enhance their environmental performance through effective PES activities and PES implementation (Aragón-Correa & Sharma, Reference Aragón-Correa and Sharma2003; Chan, Reference Chan2005; Darnall & Edwards, Reference Darnall and Edwards2006; Matten & Moon, Reference Matten and Moon2008). Thus, firms with PES are associated with higher environmental performance (Chan, Reference Chan2005; Florida & Davison, Reference Florida and Davison2001).
National cultures and market institution systems also influence PES effects on performance (Li, Li, Liu, & Yang, Reference Li, Li, Liu and Yang2010; Matten & Moon, Reference Matten and Moon2008; Su, Peng, Shen, & Xiao, Reference Su, Peng, Shen and Xiao2013). First, Westerners emphasize relative independence and value autonomy and individualism over collectivism. They are inclined to attend to one focal object and focus exclusively on one objective, using an either/or mindset (Chen, Reference Chen2002; Nisbett & Masuda, Reference Nisbett and Masuda2003). Western firms are more likely to stress a strategy's direct purpose (Nisbett & Masuda, Reference Nisbett and Masuda2003) and pay considerable attention to PES effects on environmental performance alone (King & Lenox, Reference King and Lenox2001; Walls, Berrone, & Phan, Reference Walls, Berrone and Phan2012). Second, Western firms have accumulated more resources and technologies relating to environmental protection than have firms in China (Aragón-Correa et al., Reference Aragón-Correa, Hurtado-Torres, Sharma and García-Morales2008; Darnall & Edwards, Reference Darnall and Edwards2006; Klassen & Whybark, Reference Klassen and Whybark1999) and can improve their environmental performance more easily. Third, Western governments have implemented comprehensive environmental policies, thereby incentivizing firms to pursue efficient PES via tax deductions (Villiers, Naiker, & Staden, Reference Villiers, Naiker and Staden2011). Some recent evidence also shows that US firms have strong incentives to adopt ISO 14001, an action leading to external legitimacy and stronger environmental performance (Bansal & Hunter, Reference Bansal and Hunter2003). Therefore, we posit:
Hypothesis 3a: The proactive environmental strategy of the firms in Western countries will have stronger effect on environmental performance than on economic performance, compared with firms in China.
In contrast, Chinese culture and the current market environment cause Chinese firms to emphasize the effect of PES on both firms' economic and environmental performance. First, incomplete financial and market systems provide insufficient resources to ensure continuous environmental protection (Zhu & Sarkis, Reference Zhu and Sarkis2004). The lack of complete systems forces Chinese firms to regard both environmental performance and economic performance as an inherent contradiction. Thus, they must balance their environmental and economic performance because of great pressure toward environmental protection practices and substantial investments (Zhu & Sarkis, Reference Zhu and Sarkis2004). Second, they emphasize balancing conflicting sides (Chen, Reference Chen2002; Fang, Reference Fang2010, Reference Fang2011), so that they pursue both environmental and economic performance simultaneously. The idea of paradoxical integration rooted in Chinese ‘middle way’ philosophy stresses that two opposites are interdependent and constitute a whole (Chen, Reference Chen2002). Chinese philosophy encourages a coherent business/environment relationship. The concept of tian ren he yi, a Chinese expression, captures a famous Chinese holism perspective for handling the dilemma between nature and mankind (Peng, Spencer-Rodgers, & Nian, Reference Peng, Spencer-Rodgers, Nian, Kim, Yang and Hwang2006). The expression means that nature and mankind are an interdependent organic whole (Fang, Reference Fang2010, Reference Fang2011; Li, Liu, Duan, & Li, Reference Li, Liu, Duan and Li2008; Peng, Spencer-Rodgers, & Nian, Reference Peng, Spencer-Rodgers, Nian, Kim, Yang and Hwang2006), which means that firms should improve economic performance so they will have resources remaining to sustain the natural environment. Meanwhile, firms recognize that destroying nature equals ruining oneself. Therefore,
Hypothesis 3b: Among Chinese firms, proactive environmental strategy will have similar effect on both environmental and economic performance.
Comparing Western countries and China, one notices that different national business systems produce different effects of PES for both environmental and economic performance. Under a more complete political system, Western firms have formulated higher environmental protection standards (Christmann & Taylor, Reference Christmann and Taylor2001; Li & Peng, Reference Li and Peng2008), and have developed more advanced environmental management systems and environmental technologies in response to more stringent regulations (Christmann & Taylor, Reference Christmann and Taylor2001). Thus, Western firms can place more effort into improving environmental performance. Furthermore, their complete financial system ensures that they will obtain more resources for improving environmental performance. Meanwhile, China's weak financial system cannot provide sufficient resources for firms to pursue environmental performance (Darnall & Edwards, Reference Darnall and Edwards2006; Klassen & Whybark, Reference Klassen and Whybark1999). They focus on higher economic performance because they operate in a culture of incomplete education and lower social environmental awareness. Therefore, we posit:
Hypothesis 3c: Proactive environmental strategy will have stronger effect on environmental performance in Western firms than it will have in Chinese firms.
Hypothesis 3d: Proactive environmental strategy will have stronger effect on economic performance in Chinese firms than it will have in Western firms.
METHOD
Sample – Selection of Relevant Studies
To ensure that our data-base was complete, we employed multiple search techniques. First, we searched five computerized databases (i.e., ABI/Inform, ISI Web of Science, Science Direct, Wiley, and JSTOR) that include most business journals. We used the following search terms: environmental strategies, environmental management, green strategies, ecological, and pollution prevention to find studies published prior to 2013. Second, we manually searched several major management and international business journals: Academy of Management Journal, Strategic Management Journal, Administrative Science Quarterly, Organization Science, Journal of International Business Studies, Production and Operations Management, Journal of Management Studies, Management and Organization Review, and other journals highly cited in the field of environmental management, such as Journal of Business Ethics, Journal of Environmental Economics and Management, and Journal of Business Research. Third, we studied the reference sections in all identified articles and in the citations of several key environmental articles, to identify relevant studies. Finally, we e-mailed researchers in the domain for their unpublished correlation tables and studies.
We used the following set of criteria (Kirca et al., Reference Kirca, Hult, Roth, Cavusgil, Perry, Akdeniz, Delinogul, Mena, Politte, Hoppner, Miller and White2011; Lipsey & Wilson, Reference Lipsey and Wilson2001) to select the studies: (1) the items in the meta-analysis must include only those empirical studies that reported sample sizes as well as correlations, (2) the empirical settings must be in China or western countries; (3) the articles must contain at least one relationship between PES and other variables in our model; (4) the studies must measure the constructs at the firm level; and (5) the studies must report correlation coefficients from different samples to qualify as independent. These criteria resulted in 68 studies (with 71 separate samples) and the number of effect sizes integrated is 126, including 19 for regulations, 31 for stakeholder norms, 22 for mindsets of top managers, 18 for environmental performance, and 36 for economic performance. Table 1 lists the studies, the key attributes of each study, and correlation r for the associations between PES, its antecedents, and its performance.
Attributes of 126 effects from 68 studies (71 separate samples) included in meta-analyses
Notes: PES = proactive environmental strategy; R = regulation; N = stakeholder norm; M = mindsets of top managers; En. P = environmental performance; Ec. P = economic performance.
Coding Procedure
We used a coding form to record the most important study characteristics, such as author(s), date of study, study sample size N, the correlation (r) between two variables with the relationship specified in our hypotheses. In addition, we included effect size, reliability, and research contexts (Chang, Rosen, & Levy, Reference Chang, Rosen and Levy2009). To minimize the risk of coding errors, we developed a coding protocol (Kirca et al., Reference Kirca, Hult, Roth, Cavusgil, Perry, Akdeniz, Delinogul, Mena, Politte, Hoppner, Miller and White2011; Lipsey & Wilson, Reference Lipsey and Wilson2001) that specifies all relevant variables we planned to extract from each study. Two authors read all the selected articles, coded each study independently, and resolved any differences through discussion.
Measures
Proactive environmental strategy. We examined nine types of proactive environmental practices: whether the firm had (1) ISO 14001 certification; (2) environmental audit/accounting; (3) practices of recycling, reducing resources or materials, using renewable sources; (4) eco-technical innovation; (5) disclosure of environmental information; (6) environmental cooperation with suppliers; (7) environmental products and processes; (8) environmental policy; and (9) environmental training. We identified the measures of relevant studies, and if a study used one or more practices above, we considered these practices as PES, and recorded their correlations with other constructs we examined in our study. For instance, if a study used two PES measures and reported a correlation with environmental performance for each separately, we averaged the two correlations to yield a single estimate (Hunter & Schmidt, Reference Hunter and Schmidt2004; Lux, Crook, & Woehr, 2011). On the other hand, if effect sizes of a study were reported from two independent samples, then each sample was regarded as an independent observation.
Regulations. We define this variable as the set of compulsory laws, rules, policies, and other coercive forces that the government developed to protect the environment. The regulations variable includes measures of government, state, or industry environmental protection laws, along with other coercive forces, such as environmental regulations, government regulations, states' environmental regulations, and pollution regulations. If a study used one or more variables above, we identified them as regulations, and recorded their correlations with PES. Similar with the measure of PES, if a study used multiple measures of regulations and reported effect sizes separately, we averaged the effect sizes.
Stakeholder norms. The measure of this variable is stakeholder pressure from consumers, suppliers, community members, the media, environmental organizations, and industry associates concerning the firms' environmental practices. A study with one or more measures above were identified as stakeholder norms, and their correlations with PES were recorded. Also, effect sizes of multiple measures were averaged.
Mindsets of top managers. We coded this variable based on the managers' pollution prevention attitudes, environmental values, environmental awareness, managerial perceptions and awareness, and the managers' attitudes toward their firms' environmental behaviors. One or more of the above measures included in a selected study were regarded as mindsets of top managers, and their correlations with PES were recorded. We averaged the effect sizes of a study with multiple measures of mindsets of top managers.
Environmental performance. We used objective measures about the outcomes of environmental activities, such as pollution emissions and environmental accidents reports. These measures include the total firm emissions, the toxic release inventory, the number of environmental accidents reports, the level of compliance with environmental regulations, and other environmental outcomes.
Economic performance. This is measured by sales growth and profits growth, earnings growth, return on equity (ROE), return on assets (ROA), Tobin's Q, profitability, costs, and other measures that reflect financial performance or competitive advantages.
Meta-analytic Procedures
We conducted this meta-analysis following Hunter and Schmidt's (Reference Hunter and Schmidt1990) guidelines. First, we calculated effect size estimates as the mean of the sample weighted correlations. Then, we corrected the correlations from each study for measurement errors by dividing the correlation coefficient by the product of the square root of the reliabilities of the two constructs (Hunter & Schmidt, Reference Hunter and Schmidt1990). This step was done to correct for imperfections of the research methods scholars used in the studies. Third, we transformed the reliability-corrected correlations into Fisher coefficients to account for skewness in the distribution of the sample correlation coefficients (Rosenthal, Reference Rosenthal, Cooper and Hedges1994). We then averaged and weighted the Fisher coefficients by estimating the inverse of their variance (N-3), to give greater weight to more precise estimates (Hedges & Olkin, Reference Hedges and Olkin1985). Finally, we computed the standard error of sample weighted and reliability corrected correlation, the corresponding 95 percent confidence interval, and file drawer analysis. We used Q-statistics to test the variables' heterogeneity.
To test the differences of the antecedents' effects and the outcomes' effects on proactive environmental strategies (PES), we divided the database into two parts, filtering by location, (i.e., China, and Western areas which included both the United States and European countries). We performed all the meta-analytic steps on both the total sample and the two sub-samples, China and Western, separately.
For H1a through H1c, we constructed confidence intervals around the average corrected correlations and tested whether the confidence interval included zero. In addition, results are significant when confidence intervals do not overlap. Thus, for H2a and H2b, we compared the confidence intervals for the three antecedents (i.e., regulations, stakeholder norms, and mindsets of top managers) in each context, respectively. Similarly, for H3a and H3b, we compared the confidence intervals for environmental performance and economic performance in each context, respectively. For H3c and H3d, we compared the confidence intervals for environmental performance in China and Western countries, as well as economic performance in the two contexts.
RESULTS
Table 2 summarizes the results of our analyses, including the number of effect sizes (K), total sample size (N), sample weighted correlation ( r ), sample weighted and reliability corrected correlation ( r c ), standard error of sample weighted and reliability-corrected correlation (Standard Error), and the corresponding 95 percent confidence interval (95% CI), file drawer analysis, as well as Q statistic test of heterogeneity for each relationship.
Meta-analytic results of proactive environmental strategy
Notes: a K: number of correlation coefficients meta-analysed. b The sample weighted and reliability corrected correlation. c Standard error of sample weighted and reliability corrected correlation. d The number of studies reporting null results needed to reduce the correlation to non-significance.
We first examined the overall antecedents–PES relationships. As shown in the first line of the total sample in Table 2, the sample weighted correlation ( r ) for the total set of 19 correlations and a total sample size N of 6038 observations is 0.132. After correcting for measurement errors, the sample weighted and reliability corrected correlation ( r c ) is 0.187, with a standard error of 0.013. The corresponding 95 percent confidence interval (95% CI) is 0.162–0.212, which is positive and excludes zero, indicating that the correlation between regulations and PES is distinguished from zero. Thus, the results support H1a, which predicts a positive relationship between regulations and PES. As shown in the second line of Table 2, the sample weighted correlation ( r ) for the total sample size of 7870 is 0.216, the sample weighted and reliability corrected correlation ( r c ) is 0.289, and the 95 percent confidence interval (95% CI) is 0.266–0.311. Therefore the relationship between stakeholder norms and PES is positive and H1b is supported. Likewise, the results provide support for H1c, which posits a positive relationship between top managers' mindsets and PES ( r = 0.314, r c = 0.432, K = 22, 95%CI = 0.403–0.460).
The subgroup meta-analysis results in Table 2 suggest that, in Western countries, the three antecedents all have positive effects on PES respectively. Specifically, for the relationship between regulations and PES, the sample weighted correlation ( r ) is 0.090, the sample weighted and reliability corrected correlation ( r c ) is 0.133, and the 95 percent confidence interval (95% CI) is 0.105–0.161. For the relationship between stakeholder norms and PES, the sample weighted correlation ( r ) is 0.181, the sample weighted and reliability corrected correlation ( r c ) is 0.243, and the 95 percent confidence interval (95% CI) is 0.217–0.268. For the relationship between top managers' mindsets and PES, the sample weighted correlation ( r ) is 0.276, the sample weighted and reliability corrected correlation ( r c ) is 0.380, and the 95 percent confidence interval (95% CI) is 0.345–0.415. We compared the 95 percent confidence intervals of the three relationships and the results reveal that the lower endpoint of 95% CI of mindsets of top managers–PES relationship (0.345) is larger than the upper endpoint of 95% CI of stakeholder norms–PES relationship (0.268), and the lower endpoint of 95% CI of stakeholder norms–PES relationship (0.217) is larger than the upper endpoint of 95% CI of regulations–PES relationship (0.161). The results indicate that in Western countries, top managers' mindsets show greater impact on PES than stakeholder norms do, and stakeholder norms also show greater impact on PES than regulations do. Therefore H2a is supported. On the other hand, the data in China show positive associations between the three antecedents and PES separately. For regulations–PES relationship, r = 0.326, r c = 0.437, and 95% CI is 0.377–0.497. For stakeholder norms–PES relationship, r = 0.332, r c = 0.444, and 95% CI is 0.397–0.490. For mindsets of top managers–PES relationship, r = 0.389, r c = 0.535, and 95% CI is 0.486–0.585. Furthermore, comparing the 95 percent confidence intervals of the three relationships, we find that they overlap, which reveals that the regulations, stakeholder norms and mindsets of top managers have similar positive effects on PES. Thus, H2b is supported.
The meta-analysis results in Western countries also suggest that PES has positive association with environmental performance ( r = 0.376, r c = 0.480, K = 13, 95% CI = 0.435–0.524) and economic performance ( r = 0.107, r c = 0.137, K = 26, 95% CI = 0.115–0.159). In addition, PES has a stronger effect on environmental performance than it has on economic performance in Western firms, because the lower endpoint of 95% CI of PES–environmental performance relationship (0.435) is larger than the upper endpoint of 95% CI of PES–economic performance relationship (0.159). Thus, H3a is supported. By contrast, in Chinese firms, the results show that PES has similar positive effects on environmental performance ( r = 0.263, r c = 0.308, K = 5, 95% CI = 0.260–0.356) and economic performance ( r = 0.240, r c = 0.312, K = 10, 95% CI = 0.273–0.351), according to the overlap of the two 95 percent confidence intervals. Therefore, the results confirm H3b. With regard to H3c, the meta-analysis results show that PES has a greater impact on environmental performance for Western firms ( r = 0.376, r c = 0.480, K = 13, 95% CI = 0.435–0.524) than it does for Chinese firms ( r = 0.263, r c = 0.308, K = 5, 95% CI = 0.260–0.356), because the lower endpoint of 95% CI in Western countries (0.435) is larger than the upper endpoint of 95% CI in China (0.356). Therefore H3c is supported. Similarly, H3d is also confirmed by the results which suggest that PES has a greater impact on economic performance for the Chinese firms ( r = 0.240, r c = 0.312, K = 10, 95% CI = 0.273–0.351) than it does for the Western firms ( r = 0.107, r c = 0.137, K = 26, 95% CI = 0.115–0.159).
Availability bias is an important common criticism against meta-analysis, which suspects that published research reports larger effect sizes than unpublished studies. Some studies because of the ‘file drawer problem,’ are simply never published (Dalton & Dalton, Reference Dalton, Dalton, Ketchen and Bergh2005). To address the possibility of availability bias, we performed an effect size file drawer analysis according to Rosenthal (Reference Rosenthal1979) to compute the number of additional overlooked studies needed to cause the correlation to reduce to the point of non-significance. Table 2 shows the results of the file drawer analysis. Most of the results appear to be robust with regard to a large number of null studies (mean file-drawer N is 498.20) needed to change the conclusions of this meta-analysis. However, some findings presented in Table 2 are not conclusive because a small number of additional studies could change the conclusions. In the Q-statistic test for heterogeneity, all the tests for heterogeneity are significant, demonstrating statistical heterogeneity.
Robustness Check
Our samples of Western countries include Europe and the United States. Therefore, some differences may be because of their different national contexts. To test whether the West is culturally homogenous, we differentiated the US-based studies from the European-based studies and separated the Western country data into two samples. For samples from the US-based studies, the mindsets of top managers show a greater impact on PES ( r c = 0.238, K = 6, 95% CI = 0.185–0.291) than do the stakeholder norms ( r c = 0.136, K = 9, 95% CI = 0.092–0.180), and stakeholder norms also show a greater impact on PES than do the regulations ( r c = 0.047, K = 6, 95% CI = 0.004–0.090). Meanwhile, the results also show that the effect of PES on environmental performance ( r c = 0.173, K = 8, 95% CI = 0.106–0.240) is stronger than the effect on economic performance ( r c = 0.052, K = 12, 95% CI = 0.011–0.094) in US firms. For the European samples, the mindsets of top managers show a greater impact on PES ( r c = 0.489, K = 8, 95% CI = 0.442–0.536) than do the stakeholder norms ( r c = 0.296, K = 11, 95% CI = 0.265–0.326), and stakeholder norms also show a greater impact on PES than do the regulations ( r c = 0.194, K = 8, 95% CI = 0.157–0.230). The effect of PES on environmental performance ( r c = 0.725, K = 5, 95% CI = 0.665–0.785) is stronger than that on economic performance ( r c = 0.171, K = 14, 95% CI = 0.145–0.198). Therefore, the results in the two contexts are both consistent with the results in Western countries, which suggest that our results are robust.
DISCUSSION
Our purpose in this study is to explore how national context influences relationships among proactive environmental strategies (PES), environmental and economic firm performance, and three antecedents – government regulations, stakeholder norms, and top managers' mindsets. Furthermore, because both Western and Chinese firms undertake PES, we examine the effects of national contexts on the relationships.
Our results support all the hypotheses with important contributions. They contribute to a comprehensive understanding of important antecedents of PES. Based on extant literature, we suggest that government regulations, stakeholder norms, and managers' mindsets are the most important key antecedents of PES. Going beyond this literature, we explain how effects of three antecedents may be different between China and Western countries. We integrate the national business systems approach and naive dialecticism perspectives to provide new insights for explaining effects of traditional cultural differences and market institution systems on the relationships among the antecedents, PES, and firm performance in China and Western countries. By comparing the relationships we find that different national contexts and market environments cause firms to react to different factors in making PES choices. They also place different focus on economic versus environmental performance. Therefore, we show why and how regulations, stakeholder norms, and the mindsets of top managers can differently affect PES and cause different economic and environment performance. Thus we enrich the extant literature regarding environmental strategies, the national business systems approach, and naive dialecticism perspective.
Our meta-analysis allows us to extend our research framework beyond a single theory and to examine relationships by comparatively investigating PES in China and in Western countries, focusing on both the historical traditional culture and contemporary market environment effects. Most prior studies focused on only one or two antecedents (Cordano & Frieze, Reference Cordano and Frieze2000; Darnall, Henriques, & Sadorsky, Reference Darnall, Henriques and Sadorsky2010; López-Gamero, Claver-Cortés, & Molina-Arozín, Reference López-Gamero, Claver-Cortés and Molina-Arozín2009), and few studies have compared the differences in emerging and developed economies. Our results indicate that different national environments can change the importance of the three factors in affecting PES. Western firms and Chinese firms may have varying mindsets of top managers regarding PES, and those differences may significantly influence the implementation of environmental strategies. By systematically explaining the effects of antecedents in strengthening PES and by emphasizing the contingent role of national contexts, we provide an integrated view of PES, antecedents and outcomes.
Finally, this research resolved the inconsistent views about PES influences on environmental and economic performance in the literature. We find Western firms utilize PES to achieve stronger environmental performance while China firm implement PES to improve both environmental and economic performance simultaneously. The results explain the different effects of national contexts on PES–performance relationships.
Limitations and Future Research
Despite our contributions, our study has several limitations. The first arises from issues inherent in our method. Although meta-analysis can examine a more comprehensive set of factors than those we investigated from the literature alone, the scope and nature of the original studies on which we based our meta-analysis constrained the analysis (Hunter & Schmidt, Reference Hunter and Schmidt1990). Although many studies have explored PES effects on firm performance, they may ascribe different meanings to PES. Consequently, future studies should divide PES into different types and explore their relationships with firm performance. Second, based on previous research, we focused on three main antecedents of PES—regulations, stakeholder norms, and the mindsets of top managers. However, we omitted other PES drivers such as training and investment because few primary studies show relationships involving those variables. Future studies may further explore the drivers of environmental strategies and integrate the effects of those variables on PES. Third, based on extant literature, we use nine environmental activities to measure PES, and our results suggest no significant differences among the antecedents, PES, and firm performance in both European and US samples. However, the literature has explored the differences between firms in both Europe and the United States (Matten & Moon, Reference Matten and Moon2008), and future study may use other indicators to measure PES, and examine relationship differences in both Europe and the United States. Finally, we compare China and Western countries, but future studies could consider PES in other emerging economies.
Managerial Implications
Our study has important managerial implications. Our results indicate that top managers can have a better awareness of regulations, stakeholder norms, and the mindsets of their managers may influence their adoption of proactive environmental strategies, and such environmental strategy may enhance their firms' performance. Especially in Western countries, firms can improve PES by strengthening managers' mindsets about environmental protection. Meanwhile, top managers of firms in China could further enhance their environmentally protective mindsets to strengthen their environmental strategies. In fact, strong environmentally friendly mindsets can ensure that firms in China emphasize PES for sustainable development. The Chinese government, especially, has more opportunity than Western governments to help firms strengthen their PES, and should therefore strengthen regulations. Moreover, because PES helps firms in China improve both environmental and economic performance, firms lacking PES should formulate and implement it.
CONCLUSION
Using a meta-analysis, we confirm that government regulations, stakeholder norms, and the mindsets of top managers positively affect PES, and that PES positively affects both environmental and economic firm performance. We introduce national context as a contingent factor and argue that traditional cultures and market systems can cause antecedents to have different effects on PES and on performance. We find all firms in any national environment utilize all three drivers to strengthen their environmental strategies and improve their environmental and economic performance. However, we found important differences between Chinese and Western firms. Future scholars and practitioners should understand the cultural effects and their implications for environmental management.
