Does it Really Pay to Be Green? Determinants and Consequences of Proactive Environmental Strategies
University of Queensland - Business School; Simon Fraser University (SFU) - Beedie School of Business; Financial Research Network (FIRN)
University of Toronto - Joseph Rotman School of Management
Gordon D. Richardson
University of Toronto - Rotman School of Management
Florin P. Vasvari
London Business School
November 10, 2006
We hypothesize that firms pursuing a proactive environmental strategy: (1) possess resources and capabilities not available to the other firms and (2) enjoy better financial performance subsequently. Using longitudinal data between 1990 and 2003 from the four most polluting industries in the U.S., we show that firms with superior environmental performance have more resources and enjoy better financial performance subsequently. In contrast, firms with poor relative environmental performance face resource constraints and their financial performance deteriorates further. Our results are consistent with the resource based view of the firm and indicate that although becoming "green" is associated with improvement in firm performance, such a strategy cannot be easily mimicked by all firms.
Number of Pages in PDF File: 43
Keywords: environmental strategy, environmental performance, resource based view theory
JEL Classification: M41, Q20, Q30
Date posted: January 12, 2007
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