Our research articles this week look at some of the drivers and hindrances influencing decisions on environmental action in businesses.

CEO hubris and firm pollution
This study focuses on CEO hubris and its effect on corporate unethical behaviour—pollution in particular, and in addition examines critical institutional contingencies

[state ownership (SO), political connection (PC) and industrial competition] which may moderate this effect.

With data from over-polluting listed firms based on the real-time pollution monitoring system in transitional China from 2015 to 2017, the authors find that CEO hubris is significantly positively related to firm pollution, and that the moderating role of SO is not significant, that PC positively moderates the hubris–pollution relationship and that industrial competition negatively moderates this relationship.

These findings contribute to research on the upper echelon theory, institutional theory and the growing literature on emerging economies.

Lu Zhang, Shenggang Ren, Xiaohong Chen, Dayuan Li and Duanjinyu Yin. 2020. CEO Hubris and Firm Pollution: State and Market Contingencies in a Transitional Economy.
Journal of Business Ethics, 161(2), 459–478.

 

Business’ environmental obligations and reasoned public discourse
The Kantian categorical imperative process of rational reflection and reasoned social discourse is theoretically capable of forming the moral environmental maxims applicable to business. This article argues that rational environmental discourse demands that business has an imperfect duty to develop relevant unbiased information, and perhaps to disseminate this information through participation in business-public coalitions.

For the environmental problem, this “rationality” particularly concerns (i) our obligations toward future generations and distant people while recognising that they cannot participate in current discourse, and (ii) the rules for gathering and assessing the evidence that should govern our environmental preservations and enhancements. Both these concerns demand certain scientific information requirements, as well as logical decision criteria that are perceived as stable across both overlapping generations, and affected peoples (as argued by Rawls in a different context).

The criteria for Rawls’ “considered moral judgments” are shown to apply to resolutions of these business-related ethical conundrums. In a way similar to Kant’s anthropological examinations of humanity’s antisocial behaviours, this article also examines various biases that inhibit this social reasoning.

 

Read this Open Access article online for free

 

Richard Robinson & Nina Shah. 2019. Business’ Environmental Obligations and Reasoned Public Discourse: A Kantian Foundation for Analysis.
Journal of Business Ethics, 159(4), 1181–1198.

 

More is not always better: Slack resources, environmental innovations and financial performance
Environmental research has usually highlighted that the existence of slack resources in an organisation helps allocate investment to innovative initiatives. However, the existing literature has paid very limited attention to how slack resources can influence the effects of focused and diversified innovations in different ways.

Agency theory scholars claim that a manager’s first preference when confronted with discretionary resources will not generate positive investments for the firm, but their own opportunistic preferences. The differences between focused and diversified environmental innovations allow us to gain a better understanding of the financial impact of being focused and how slack resources matter in this context.

The authors analyse a longitudinal sample of 5845 environmental patents from the 75 largest companies in the electrical components and equipment industry worldwide.

The results show that high levels of slack resources reduce the existing positive relationship between focused environmental innovations and a firm’s financial performance. These results contribute to delineating the theoretical and empirical implications of focused versus diversified environmental innovations and extend the literature on ethical dilemmas concerning managers’ use of slack resources in the firm.

Dante I. Leyva-de la Hiz, Vera Ferron-Vilchez & J. Alberto Aragon-Correa. 2019. Do Firms’ Slack Resources Influence the Relationship Between Focused Environmental Innovations and Financial Performance? More is Not Always Better.
Journal of Business Ethics,159(4), 1215–1227.

 

Management control systems and environmental capabilities
A growing number of companies are implementing proactive environmental strategies with the objective of gaining competitive advantage through an enhanced reputation, the reduction in production costs, and a first-mover advantage in the green product market. Yet according to the natural-resource-based view, the development and maintenance of unique and valuable environmental capabilities are the central elements allowing companies to gain financial benefit from their proactive environmental strategy.

In this context, management control systems can contribute to the development of environmental capabilities by focusing attention on strategic priorities and stimulating dialogue.

Through a single case study, and building on Simons’ (Levers of control: how Managers use innovative control systems to drive strategic renewal, Harvard Business School Press, Boston, 1995) four levers of control, the authors propose a conceptual framework of management control levers that show how companies can enhance
(1) stakeholder integration capability through the joint use of belief, boundary, and diagnostic control systems;
(2) shared vision capability through the joint use of the belief and boundary systems;
(3) organisational learning capability through the use of interactive control systems and to a lesser extent diagnostic control systems; and
(4) continuous innovation capability through the use of interactive control systems, belief systems and to a lesser extent diagnostic control systems.

Elisabeth Albertini. 2019. The Contribution of Management Control Systems to Environmental Capabilities.
Journal of Business Ethics, 159(4), 1163–1180.

 

Does inducing hypocrisy help or hinder the adoption of pro-environmental behaviours?
To promote ethical and pro-environmental behaviour, hypocrisy sometimes is made salient to individuals: i.e., they are made aware that their past behaviour does not conform to expressed norms. The fact that this strategy may backfire and may even reduce the likelihood of individuals performing the desired action has been largely overlooked.

This paper develops a theory of how hypocrisy stimulates two opposing heuristic processes: one that favors the former, positive outcome (the eco-citizenship effect) and one that renders hypocrisy non-effective (resistance-to-habit-change effect). The authors test the model and reveal important boundary conditions using the finding of a comprehensive field experiment (1377 consumers).

Situational (public vs. private advocacy) and individual factors (low vs. high construal levels) determine which of the competing mechanisms is activated. The paper contributes a novel understanding to managers and scholars of how hypocrisy operates and illuminates the contingencies of when this strategy is beneficial.

Karoline Gamma, Robert Mai and Moritz Loock. 2020. The Double-Edged Sword of Ethical Nudges: Does Inducing Hypocrisy Help or Hinder the Adoption of Pro-environmental Behaviors?
Journal of Business Ethics, 161(2), 351–373.

 

Sustainability orientation, green supplier involvement, and green innovation performance
While green innovation has a positive impact on firms’ performance, some established firms that initiate green innovation activities (referring to diversifying green entrants) could suffer from insufficient new green knowledge and skills. Since adopting a sustainability orientation helps firms commit to the creation of superior sustainable practices, and efficiently invest resources necessary to develop appropriate new green products, leading to superior green innovation performance, sustainability orientation offers an alternative approach for diversifying green entrants to achieve green innovation success.

Building on resource-based, knowledge-based, and capabilities theories, this study aims to identify key factors that enable sustainability orientation of diversifying green entrants and enhance its effect on green innovation performance. As sustainability issues frequently occur upstream at the supplier level, and since supplier involvement effectively determines new product success, this study theorises that diversifying green entrants that adopt sustainability orientation require two types of green supplier involvement (as a knowledge source and a co-creator) to enhance the effect of sustainability orientation on green innovation performance.

Green knowledge-processing capability and green R&D capability complement green supplier involvement as a knowledge source and green supplier involvement as a co-creator, respectively, to further enhance the amount of green innovation performance. Based on a longitudinal dataset of 336 diversifying green entrants, the results support all the hypotheses.

Interestingly, an additional analysis suggests that when diversifying green entrants implement green supplier involvement as a co-creator, they achieve greater green innovation performance than those who implement green supplier involvement as a knowledge source. These findings provide important theoretical implications and practical guidance for established firms to pursue green innovation.

Colin  C. J. Cheng. 2020. Sustainability Orientation, Green Supplier Involvement, and Green Innovation Performance: Evidence from Diversifying Green Entrants.
Journal of Business Ethics, 161(2), 393–414.