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Does it Really Pay to Be Green? Determinants and Consequences of Proactive Environmental Strategies

43 Pages Posted: 12 Jan 2007  

Peter Clarkson

University of Queensland - Business School; Simon Fraser University (SFU) - Beedie School of Business; Financial Research Network (FIRN)

Yue Li

University of Toronto - Joseph Rotman School of Management

Gordon D. Richardson

University of Toronto - Rotman School of Management

Florin P. Vasvari

London Business School

Multiple version iconThere are 2 versions of this paper

Date Written: November 10, 2006

Abstract

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.

Keywords: environmental strategy, environmental performance, resource based view theory

JEL Classification: M41, Q20, Q30

Suggested Citation

Clarkson, Peter and Li, Yue and Richardson, Gordon D. and Vasvari, Florin P., Does it Really Pay to Be Green? Determinants and Consequences of Proactive Environmental Strategies (November 10, 2006). Available at SSRN: https://ssrn.com/abstract=955890 or http://dx.doi.org/10.2139/ssrn.955890

Peter Clarkson

University of Queensland - Business School ( email )

Brisbane, Queensland 4072
Australia

Simon Fraser University (SFU) - Beedie School of Business ( email )

8888 University Drive
Burnaby, British Colombia V5A 1S6
Canada

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Yue Li

University of Toronto - Joseph Rotman School of Management ( email )

Joseph Rotman School of Management
105 St. George Street
Toronto, Ontario M5S 3E6
Canada
416-978-0857 (Phone)
416-971-3048 (Fax)

Gordon D. Richardson

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
416-946-8601 (Phone)
416-971-3048 (Fax)

Florin P. Vasvari (Contact Author)

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

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