On the Heterogeneous Impacts of Green Manufacturing Adoption on Operational Efficiency

Abstract

The trade-off between environmentally friendly policies and efficiency gains challenges the widespread adoption of green manufacturing. The existing literature has yet to reach a consensus on the operational efficiency of green manufacturing adoption. Drawing upon a resource-based view, this study examines the effects of green manufacturing adoption on operational efficiency, with a focus on the moderating role of organizational and technological characteristics on the said relationship. Based on a two-stage difference-in-differences analysis on 18,297 firm-year observations, we first observe that, on average, firms’ adopting green manufacturing enhances operational efficiency, particularly in the longer run. Most notably, state ownership and labor intensity strengthen the positive impact of green manufacturing adoption on operational efficiency. However, the positive impact of green manufacturing on operational efficiency is weakened for firms that have focused on digital transformation and research and development (R&D) activities. This research adds new insights into the operations management (OM) literature by uncovering the complementary role of organizational characteristics and the substitutive role of technological characteristics on the link between green manufacturing adoption and operational efficiency. Guidelines are provided for manufacturers to align green manufacturing with business operations and strategically tailor their approach to maximize the efficiency gains of green manufacturing adoption.

Keywords: green manufacturing, two-stage difference-in-differences, operational efficiency, resource-based view