Resource Efficiency Strategies and Market Conditions

15 Pages·2015·0.35 MB·English

by  Magali A. Delmas

LongRangePlanning48(2015)80–94
ContentslistsavailableatScienceDirect
Long Range Planning
journal homepage: http://www.elsevier.com/locate/lrp
Resource Efficiency Strategies and Market Conditions
Magali A. Delmas, Sanja Pekovic
Inthispaperweanalyzethefactorsthatdrivetheadoptionofinnovativeresourceefficiencystrategiestoreduceenergyandmaterialuse,
under different market conditions. We uncover the “paradox” of lower adoption of resource efficiency strategies in an economic
downturnandidentifythecharacteristicsoffirmsthatadoptthesestrategies.UsingdatafromaFrenchsurveywithresponsesfrom5,877
firms,weshowthatonly10%ofthefirmsinoursampleadoptresourceefficiencystrategiesinperceivedeconomicdownturnascompared
to46%inperceivedsteadyorgrowingmarketconditions.However,theprobabilityofadoptingsuchstrategiesindownturnconditions
risesto24%forfirmsthatfocusoncostleadershipstrategies,haveadoptedenvironmentalstandards,conducttheirresearchinternally
andareverticallyintegrated.Weproviderecommendationstoencouragemorewidespreadadoptionofresourceefficiencystrategies.
(cid:1)2013ElsevierLtd.Allrightsreserved.
Introduction
Intheliteratureonbusinessandtheenvironment,importantheadwayhasbeenmadeinunderstandingthefactorsthat
drive firms to adopt environmental strategies, such as pollution prevention activities and international environmental
managementstandards(Darnalletal.,2000;Delmas,2001;Hart,2005).However,lessattentionhasbeenpaidtothede-
terminantsoftheadoptionofinnovativeresourceefficiencystrategiesthataimtoreducetheuseofenergy,resourceand/or
material per unit of production. Such strategies include the introduction of product or services innovation, or process or
marketinginnovationthatresultinthereductionoftheuseofrawmaterialorenergyconsumedbyunitproduced.
Energyandresourceefficiencystrategieshavebeenrecognizedsincetheearly1970swiththepotentialforsignificantcost
savings(Arnyetal.,1998;ClinchandHealy,2000),andtherecenteconomicdownturnfurtherenhancestheappealofthe
adoption of such frugal strategies to gain efficiencies in constrained times (Von Weizsäcker et al., 2010). The promise of
energyconservationandresourceefficiencystrategiesaskeyintheefforttocounteracttheeffectsofclimatechange(IPCC,
2007)alsoaddstotheirdesirability.However,evidencesuggeststhatasignificantproportionofenergyandresourceeffi-
ciency improvement potential remains untapped and that manyenergy and resource efficiency investments are not un-
dertakendespitetheirapparentprofitability(DeCanio,1993;Blassetal.,2011;ExpertGrouponEnergyEfficiency,2007).Are
firmsmorelikelytoinvestinresourceefficiencystrategiesinaneconomicdownturn?Arechangesintheeconomiccontext
sufficientdriversofchangesinfirms’strategiesregardingresourceefficiency?
Inthispaper,weinvestigatethefactorsthatdrivetheadoptionofinnovativeenergyandresourceefficiencystrategiesin
differentmarketconditions.Webuildonthecontingencytheory,whichcontendsthatfirmstrategiesneedtobetailoredto
theparticularinternalandexternalcircumstancesfacedbyanorganizationinordertoachievesuccess(Porter,1980;Pearce,
1983;Day,1984;MillerandFriesen,1986).Inthisperspective,businessesthatmanagetheirstrategiesinresponsetoeco-
nomic environmental changes are better able to thrive. However, these relationships become less clear during economic
downturnsbecauseoftheincreasingeconomicenvironmentaluncertaintyandtheneedforfirmstodownsize(Baileyand
Szerdy,1988; Boyle and Desai,1991). An economic decline might have differing impacts on firm strategies and perfor-
mancedependingonthefirmcapabilitiesandstructures(HamelandPrahalad,1994).Itisthereforeveryimportanttoclarify
thelinkbetweenagivenstrategy,economicenvironmentalpreconditionsandorganizationalfactors(Wuetal.,2007).
Inexploringthislinktheoreticallyaswellasempirically,thepapertakesafirststeptowardsstudyingtheeffectofmarket
conditionsontheadoptionofenergyandresourceefficiencystrategies,anissuethathasreceivedrelativelylittlesystematic
analysis.Wearguethatfirms’decisionstoadoptenergyandresourcestrategiesmaydifferaccordingtothemarketconditions
underwhichtheyoperate,andthatsuchstrategicchoicesmaybecontingentonthefitbetweenthecharacteristicsoftheexternal
marketenvironmentandtheorganizationofthefirm.Buildingoncontingencytheory,wecontendthatthesuccessfuladoptionof
innovativeresourceefficiencystrategiesbyfirmsinperceiveddownturneconomicconditionsrequirecomplementarycapa-
bilitiesininnovationandenvironmentalmanagement,asuitableorganizationalstructureandacompatiblecompetitivestrategy.
0024-6301/$–seefrontmatter(cid:1)2013ElsevierLtd.Allrightsreserved.
http://dx.doi.org/10.1016/j.lrp.2013.08.014
M.A.Delmas,S.Pekovic/LongRangePlanning48(2015)80–94 81
Inordertotesttheimpactofmarketconditionsontheadoptionofenergyandresourceefficiencystrategies,weusedata
fromalargerepresentativesampleof5,877Frenchfirmswithmorethantwentyemployees;thedataisdrawnfromthree
French cross-sectional surveys: the Organizational Changes and Computerization Survey (COI, 2006), the Community
InnovationSurvey(CIS,2008)andtheAnnualFirmSurvey(EAE,2006).Thisallowsustointroducemanyfactorsthatcanbe
consideredassignificantincentivesinafirmdecisiontoadoptenergyandresourceefficiencystrategies.
Eventhoughenergyandresourceefficiencystrategies have thepotentialtolead tocost savings,wefindthatthe, the
adoptionoftheseefficiencystrategiesissignificantlylowerunderperceiveddownturnmarketconditions,ascomparedto
perceivedsteadyorgrowingconditions.However,firmswithcomplementaryenvironmentalstrategies,internalR&D,that
areverticallyintegrated,orthatpursuegeneralcostleadershipstrategies,tendtoinvestmoreinenergyandresourceeffi-
ciencystrategiesinthesedownturnmarketconditions.
Inbothitstheoreticalandempiricaldomains,thispaperextendsexistingresearch.Westillhavelimitedunderstandingof
howfirmsaredevelopingstrategiestocopewithresourceconstraintswhilemaintainingorevenimprovingtheireconomic
sustainability.Buildingontheliteratureanalyzingtheorganizationalfactorsthatdrivetheadoptionofsustainableorenvi-
ronmental strategies (Darnall and Edwards, 2006; Delmas and Toffel, 2008), our research highlights the links between
existingorganizationalcapabilities,marketconditionsandresourceefficiencystrategies.Weshowthatenergyandresource
efficiency strategies are not adopted in isolation but operate in synergy with existing organizational capabilities and
competitive strategies. Our findings also have important policy implications, as they can enable policy-makers to better
formulateandeffectivelyapplyenergyandresourceefficiencypolicies.
Literaturereview
Energy, material and resource efficiency strategies aim at reducing the footprint of industrial activities (Kounetas and
Tsekouras, 2008), and may be regarded as a constituting a significant share of all environmental innovations (Rennings
andRammer,2009).Energyefficiencystrategiesincludeallchangesthatresultindecreasingtheamountofenergyusedto
produceoneunitofeconomicoutputorservices(e.g., Patterson,1996).Materialand resourceefficiencystrategiesreferto
changes that result in reducing the amount or quantity of material and natural resources required to produce a unit of
economicoutputorservices.Fortheremainderofthispaper,wewillusethetermresourceefficiencyasagenericumbrella
termthatcoversenergyefficiencyontheonehandandmaterialefficiencyontheotherhand.
Resourceefficiencystrategiesarepartofpollutionpreventionmethods(Hart,1995;HartandMilstein,2003).Notonlycan
theyreducethenegativeenvironmentalimpactofafirm’sactivities,butmayalsobetranslatedintolowerprocurementand
wastemanagementcosts,andintomoregeneralcostsavings(VonWeizäckeretal.,1997;Hinterbergeretal.,1997;Schleich,
2009).However,recentresearchhashighlightedthatsuchenvironmentalimpactsandcostsavingsmightbecontingenton
externalfactorsaswellastheorganizationalstructureofthefirm(Aragón-CorreaandRubio-López,2007),andsomeresource
efficiencystrategiescouldpotentiallyleadtoareboundeffect(Berkhoutetal.,2000;HolmandEnglund,2009).Itistherefore
importanttounderstandtheexternalandorganizationalfactorsthatleadtotheadoptionofresourceefficiencystrategiesthat
favorefficiencygains.
Researchindicatesthat,inspiteofwhatwouldseemtobesignificantopportunitiesforprofitability,manyenergyeffi-
ciency practices are not adopted; and a notable amount of energy efficiency improvement potential remains unrealized
(ExpertGrouponEnergyEfficiency,2007;DeCanio,1993).Forexample,Blassetal.,(2011)foundthatonly35%ofenergy
efficiencyrecommendationswithanaveragepaybackofayearwereadoptedbysmallandmediumenterprises,aspartofthe
DepartmentofEnergy’sIndustrialAssessmentCenterProgram.Manyexplanationshavebeenprovidedintheliteraturefor
thisphenomenon,rangingfromeconomicfactorsandcomplexityofregulation(Mueller,2006)toorganizationalbarriers,
suchasmisplacedincentives,riskaversionandshortsightednessofmanagement(Blumsteinetal.,1980;DeCanio,1993).For
instance, scholars have argued that underinvestment in energy by firms is explained by the so-called “split incentive”
problem, involving “transactions or exchanges where the economic benefits of energyconservation do not accrue tothe
personwhoistryingtoconserve”(GoloveandEto,1996).Anothercauseforunderinvestmentmaybetheallegedmyopiaof
management (DeCanio, 1993; Jaffe and Stavins, 1994; Thollander, 2008), which would explain why energy-efficient in-
vestmentsrequireshorterpaybackperiodsorveryhighinternalhurdleratesascomparedtootherinvestments(DeCanio,
1993;Ross,1986;Sorrelletal.,2004).Thisliteraturealsosuggeststhatenergyconservationmaynotattracttopmanage-
mentinterest,andmaythereforebegivenlowerprioritythanotherinvestmentswithsimilarpayback(SassoneandMartucci,
1984).Althoughtheliteraturefocusesoncognitiveorpsychologicalfactors,ithaspaidlessattentiontothequestionofhow
marketconditionscaninfluencetheattractivenessofresourceefficiencystrategies,aswellastothequestionofhowsuch
conditionsinteractwithorganizationalfactors.
Similarly,thebusinessandtheenvironmentliteraturetodatehasbeenlimitedinitsanalysesoftherolesplayedbymarket
and economicconditions inthe adoptionofpollutionprevention strategies.Moststudieshave focusedonthe influence of
externalstakeholders,suchasregulators,customers,orenvironmentalnon-governmentalorganizations,buthavedevotedless
attention to the general economic conditions surrounding the firm. These studies have investigated how the adoption of
pollution prevention strategies is influenced by environmental legislation and regulations (Carraro et al., 1996; Delmas,
2002a,b;DelmasandMontes-Sancho,2010;Delmas,etal.,2007;MajumdarandMarcus,2001;RugmanandVerbeke,1998;
Russo,1992), customer demand (Christmann and Taylor, 2001; Delmas and Montiel, 2009), and the desire to improve or
maintain relations withtheircommunities (Floridaand Davison, 2001; Henriques andSadorsky,1996).Other studies have
82 M.A.Delmas,S.Pekovic/LongRangePlanning48(2015)80–94
shownthatmanagerialperceptionsoftheimportanceofvariousstakeholderpressureswereassociatedwithamoreproactive
environmentalstance(Delmas,2001;HenriquesandSadorsky,1999;SharmaandHenriques,2005).Severalstudieshavefound
evidencethatcustomerand/orbuyerpressurehasmotivatedfirmstoadoptenvironmentalmanagementpractices(Delmasand
Montiel, 2008; Henriques and Sadorsky, 1996). A recent empirical analysis found customer pressure to be an important
determinantofthelikelihoodofadoptingtheISO14001standard(DelmasandToffel,2008).Yet,thereiscomparativelyless
researchonhowgeneralmarketconditionsimpacttheadoptionofsuchpollutionpreventionstrategies(Aragon-Correaand
Sharma, 2003; Marcus and Geffen, 1998; Russo and Fouts, 1997; Sharma et al., 2007). The research demonstrates that
perceivedmunificenceinthegeneralbusinessenvironmentincreasesthelikelihoodthatafirmwilluseitscapabilitiesand
resourcestodevelopaproactiveenvironmentalstrategy(Aragon-CorreaandSharma,2003).Howevertheimpactofeconomic
conditionsonfirms’abilitytoreapthebenefitsfromproactiveenvironmentalstrategiesislessclear.Aragon-CorreaandSharma
(2003) argue that perceived munificence in the business environment weakens the association between a proactive envi-
ronmentalstrategyandcompetitiveadvantage,whileRussoandFouts(1997)findthatfirmsaremorelikelytoprofitfrom
environmentalstrategieswhentheyareinhigh-growthindustriesratherthanlow-growthindustries(RussoandFouts,1997).
Inaddition,thisresearchdoesnotinvestigatehoweconomicconditionsimpacttheadoptionofresourceefficiencystrategies.
Investigating the market conditions under which resource efficiency strategies are adopted is important, because this
informationmighthaveimplicationsforthecostsandbenefitsofsuchstrategies.Theliteraturehasidentifiedseveralop-
portunities for proactive environmental strategies to benefit shareholders directly (McWilliams and Siegel, 2001; Siegel,
2009). These include value creation strategies achieved through the development of greener products (Klassen and
Whybark, 1999; Reinhardt, 1998), benefits resulting from non-market strategies to influence government regulation so
that theirrivals areata disadvantage (Shrivastava,1995), andcost savings achievedbypreventing pollution (Ambec and
Lanoie, 2008; Hart, 1995). However, such opportunities might depend on the market conditions surrounding the firm.
Indeed,valuecreationstrategiesthroughthedevelopmentofgreenerproductsmightbemoreattractiveingrowingmarket
conditions,whilecostsavingsachievedbypreventingpollutionmightbemoresuitedtodecliningeconomicconditions.
Thelackofresearchonthefactorsthathamperorfacilitatetheadoptionofresourceefficiencystrategiesindownturn
economicconditions,however,isproblematic.Sucheconomicconditionscallforimportantchangesinthewaybusinessis
undertakingitsactivities(VonWeizsäckeretal.,2010),yetwestillhavelittleempiricalevidenceaboutthemostfavorable
combination of organizational factors and market conditions that facilitate the successful adoption of resource efficiency
strategies.
Hypotheses
Wefirstdevelopcompetinghypothesesontheroleofdownturnmarketconditionsontheadoptionresourceefficiency
strategies. Second, building on contingency theory, we develop hypotheses on how organizational factors impact the
adoptionofsuchstrategiesindependentlyorinrelationtodownturnmarketconditions.
Downturnmarketconditions
Downturnmarketconditionsaremarkedwithfewermarketopportunitiesandgeneralunpredictabilityoftheeconomic
environment(Anderson,1988).Therearetwocompetinghypothesesregardingtheimpactofdownturnmarketconditionson
theadoptionofinnovativeresourceefficiencystrategies.
Theliteratureindicatesthattheadoptionofenergyresourceefficiencystrategiesisassociatedwithcostsavingsforfirms
in the light of expected high future energy prices, improved security of energy services, and other co-benefits such as
employmentorproductivitygainsandhealthbenefitsduetoloweremissionsoflocalpollutantsde.g.,nitrogenoxidesand
sulfur(Schleich,2009).Weshouldthusexpectthat,ineconomicdownturnconditions,firmswouldbemorelikelytoresortto
resourceefficiencystrategiesinordertoreducetheircosts.
However,theinnovationliteratureindicatesthatinnovationoftenoccurinperiodsduringwhichastrategicwindowis
opened,whichischaracterizedbymarketgrowth(Abell,1978;LilienandYoon,1990).AsFreemanetal.,(1982)indicate,in
adversemarketenvironments,investmentsandinnovationarelikelytobereducedbecauseoflowprofitmargin,lowcash
flow and a general “pessimistic mood”, while in periods of market expansion there are opportunities for innovation to
emerge.Furthermore,becauseofthegeneralunpredictabilityoftheeconomicenvironment,managersmightfavorshorter-
term investment and ordelay investment decisions in general (Dixit and Pindyck,1994), including decisions toinvest in
resourceefficiencystrategies.Wethereforeprovidetwocompetinghypothesesontherelationshipbetweenmarketcondi-
tionsandtheadoptionofresourceefficiencystrategies.
H1a:Firmsaremorelikelytoadoptresourceefficiencystrategieswhentheyperceivethatthemarketisdown.
H1b:Firmsarelesslikelytoadoptresourceefficiencystrategieswhentheyperceivethatthemarketisdown.
Aswearguebelow,marketconditionsalonecannotdeterminethesuccessofresourceefficiencystrategies.Theadoption
ofsuchstrategies,liketheadoptionofotherstrategiesundertakenbythefirm,needtobeassociatedwithcapabilitiesand
alignedwiththemainstrategyofthefirm.Contingencytheoristshavehighlightedtheimportanceofthefitofafirm’sstrategy
withtheenvironmentalororganizationalcontingenciesfacingthatfirm(Andrews,1971;HoferandSchendel,1978,Scholz,
M.A.Delmas,S.Pekovic/LongRangePlanning48(2015)80–94 83
1987),inordertoimprovefirmperformance(GinsbergandVenkatraman,1985;MilesandSnow,1994).Recentresearchhas
alsodemonstratedhoworganizationalfactorsmoderatetheexternaleconomicandregulatorypressuresfacedbyfirmsand
playanimportantroleintheadoptionofenvironmentalmanagementstrategies(Aragon-CorreaandSharma,2003;Darnall
andEdwards,2006;DelmasandToffel,2008).
GeneralStrategy(StrategicFit).Porter’s(1980,1985)genericbusiness-levelstrategies,costleadership,differentiation,and
focushavebecomeadominantparadigminthebusinesspolicyliterature.Acostleadershipstrategyinvolvesthefirmwinning
marketsharebyappealingtocost-consciousorprice-sensitivecustomers.Thisisachievedbyhavingthelowestpricesinthe
targetmarketsegment.Tosucceedatofferingthelowestpricewhilestillachievingprofitability,thefirmmustbeabletooperate
atalowercostthanitsrivals.Thisisattainedbyprovidinghighvolumesofstandardizedproductsandbylimitingcustomization
ofservice.Productioncostscanbekeptlowbyusingfewercomponents,orstandardizedcomponents,andbylimitingthe
numberofmodelsofferedtoincreaseeconomiesofscale.Overheadscanbekeptlowbypayinglowerwages,byencouraginga
cost-consciousculture,andsoon.Maintainingthisstrategyrequiresacontinuoussearchforcostreductionsinallaspectsofthe
business.Becauseresourceefficiencystrategiesshouldleadtocostreduction,suchstrategiesshouldbemoreattractivetofirms
thatarepursuingcostleadershipstrategiesthantothosepursuingqualityordifferentiationstrategies.Indeedastrategyof
differentiationaimstocreateaproductthatconsumersperceiveasuniqueandthusenablesthefirmtocommandapremium
pricethatexceedstheaccumulationofextracostsgeneratedduringproductdevelopment.Adifferentiationstrategyisusually
supportedbysubstantialinvestmentsinresearch,productorservicedesign,andmarketing(Miller,1988)andfirmsfocusing
andsuchstrategiesarethereforelessconcentratedoncostreduction.Wethereforehypothesizethat:
H2a:Costleadershipstrategyorientedfirmswillbemorelikelytoadoptresourceefficiencystrategies.
H2b:Quality/differentiationstrategyorientedfirmswillbelesslikelytoadoptresourceefficiencystrategies.
ComplementaryCapabilities.Researchhasshownthatknowledgeinonefieldcaneasetheabsorptionofnewknowledge
inrelatedfields(CohenandLevinthal,1990;Delmasetal.,2011).Firmsthathavedevelopedorganizationalcapabilitiesto
acquirenewknowledgewillbebetterabletoacquireknowledgerelatedtoresourceefficiencystrategiesthanfirmsthathave
notdevelopedsuchcapabilities(MarcusandGeffen,1998;DarnallandEdwards,2006).Forexample,giventheconceptual
similaritybetweenenvironmentalmanagementsystemsthataimatreducingthefirmenvironmentalimpactandresource
efficiencythataimsatreducingoverallresourceusage,itmaybepossibletoacceleratetheaccumulationofresourcesinthe
formerbyintegratingitintothelatter.Infirmsthatdonothavewell-developedenvironmentalmanagementsystems,there
couldbebarrierstoimplementingresourceefficiencystrategies,becauseofalackofcoordinationbetweendifferentunits
regardingthefirm’senvironmentalimpact.Similarly,firmswithR&Dactivitiesthatareconductedinhouseshouldalsobe
more prepared to invest in novel resource efficiency strategies as they have developed internal capabilities to innovate
(Conrad,1997;McWilliamsandSiegel,2001).Wethereforehypothesizethefollowing:
H3a:Firmsthathaveadoptedenvironmentalstandardsaremorelikelytoadoptresourceefficiencystrategies.
H3b:FirmswithR&Dinvestmentsaremorelikelytoadoptresourceefficiencystrategies.
VerticalIntegration
Researchhasshownthatfirmswithcentralizeddecision-makingaremorelikelytoinvestinresourceefficiencybecause
centralizationprovidesthenecessarycoordinationtoresolvesplitincentivesissues(HowarthandSanstad,1995;Sorrelletal.,
2004).Misplaced,orsplit,incentivesaretransactionsorexchangeswheretheeconomicbenefitsofenergyconservationdo
notaccruetothepersonwhoistryingtoconserve(HowarthandSanstad,1995).Verticalintegrationcanalsofacilitatethe
flow of information necessary to put into place resource efficiency strategies (Golove and Eto,1996). As Williamson has
argued(1985),thekeyissuesurroundinginformationisnotitspublicgoodscharacter,butratheritsasymmetricdistribution
combined with thetendencyof thosewhohave it touse itopportunistically.Outside ofverticalintegration,accuratein-
formationmaybedifficulttoobtainbecausethosewhohaveinformationhavestrategicreasonstomanipulateitinorderto
inflateitsvalue(GoloveandEto,1996).Wethereforehypothesizethat:
H4:Verticallyintegratedfirmsaremorelikelytoadoptresourceefficiencystrategies.
DownturnMarket Conditions,CostLeadershipStrategy,ComplementaryCapabilitiesandVerticalIntegration.Herewe
argue that investment in resource efficiency strategies requires a fit between overall cost leadership strategies, market
downturnandinnovativecapacity.
First,alow-coststrategyshouldbemoreattractiveinadownturnenvironment.ThisisconsistentwithMurray(1988),
whoarguedthatalow-coststrategyismostviablewhencustomersaresensitivetopriceandthefirmcansustainitscost
advantagewitheconomiesofscale,oraccesstocheapmaterialsorchannelsofdistribution.Wuetal.,(2007)alsoarguedthat
alow-coststrategymightbeparticularlybeneficialinhostileeconomicenvironmentsthatcontainfeweropportunitiesand
are more competitive than usual. They provided empirical evidence that differentiation-oriented firms underperformed
efficiency-orientedfirmsindownturneconomicconditions(Wuetal.,2007).
Second, firms that possess the existing capabilities to reduce their cost, but also those that have adopted green and
innovativestrategiesmighthavealreadyaleadindownturnconditionstoadoptresourceefficiencystrategies.Thisisbecause
84 M.A.Delmas,S.Pekovic/LongRangePlanning48(2015)80–94
insuchconstrainedeconomictimes,thecostofadoptingresourceefficiencystrategiesmightberelativelylowerforthem
sincetheyalreadyhavecomplementarycapabilities.Indeed,thepre-existenceofcomplementarycapabilitiesmightreduce
the information and search costs of resource efficiency strategies. In addition, the uncertainty of the success of resource
efficiencystrategiesmightbelowerforfirmswithcomplementarycapabilitiessincetheyalreadyhavesomeexperiencein
developingrelatedcompetencies.Firmsthatareverticallyintegratedshouldalsohaveanadvantagetoaccessinformationin
downturnconditionmarkedbyincreaseduncertaintyandcompetition.ThisisconsistentwithSharmaetal.,whoarguedthat
perceived uncertainty in a general business environment increases the likelihood of a firm’s deploying its organizational
learning, cross-functional integration capability, continuous innovation capability to generate a proactive environmental
strategy(Sharmaetal.,2007).Wethereforehypothesizethefollowing:
H5a:Coststrategyorientedfirmswillbemorelikelytoadoptresourceefficiencystrategiesinperceiveddownturnmarket
conditionsascomparedtothosethatarenotcostleadershiporiented.
H5b:Quality/differentiationorientedfirmswillbelesslikelytoadoptresourceefficiencystrategiesinperceiveddownturn
marketconditionsascomparedtothosethatarenotadoptedQuality/differentiationoriented.
H5c:Firmsthathaveadoptedenvironmentalstandardsaremorelikelytoadoptresourceefficiencystrategiesinperceived
downturnmarketconditionsascomparedtothosethathavenotadoptedenvironmentalstandards.
H5d: Firms with R&D investments aremore likely to adopt resourceefficiency strategies in perceived downturn market
conditionsascomparedtothosethathavenotinvestedR&D.
H5e:Verticallyintegratedfirmsaremorelikelytoadoptresourceefficiencystrategiesinperceiveddownturnmarketcon-
ditionsascomparedtonon-verticallyintegratedfirms.
OurframeworkissummarizedinFigure1.Wehighlighttheroleofafirm’sexternalenvironment,competitivestrategies,
organizationandresourcesasdriversoftheadoptionofresourceefficiencystrategies.Wehypothesizethatfirmsthataremore
likelytoinvestinresourceefficiencystrategiesindownturnmarketconditionsarethosethathaveadoptedcostleadership
strategies, invested in environmental standards and internal R&D, and are vertically integrated. The combination of these
characteristicsmakesthesefirmsmorelikelytobeabletoadoptsuchstrategiesandtobenefitfromtheirimplementation.
Method
Data.Inordertotestourhypotheses,weusedatafromthreecross-sectionalFrenchsurveys:theOrganizationalChanges
andComputerizationSurvey1(COI,2006),theCommunityInnovationSurvey2(CIS,2008)andtheAnnualFirmSurvey3(EAE,
2006). Our sample includes 5,877 firms based on merging the data of these three surveys. Although the surveys were
administered in 2006, a little before the mainworldwide economic recession, France had been in a relatively depressed
economicsituationforsometimeatthatpointwithaGDPgrowthsignificantlylowerthanthecountriesoftheOrganization
forEconomicCooperationandDevelopment(OECD),4butmoreimportantlythesurveysprovideusefulinformationaboutthe
generaleconomicconditionssurroundingthefirms,asperceivedbytherespondent.Thisallowsustocomparecorporate
behaviorindifferentperceivedeconomicconditions.
TheCOIsurveyisamatchedemployer-employeedatasetonorganizationalchangeandcomputerizationfromtheNational
InstitutecreatedthissurveyforStatisticsandEconomicStudies(INSEE),theMinistryofLaborandtheCenterforLaborStudies
(CEE). The surveycovers 7,700 firms from the private sector. This is a representativepopulation of French firms from all
industries except agriculture, forestry and fishing. Each firm completed a self-administered questionnaire regarding the
utilizationofinformationtechnologiesandworkorganizationalstrategiesin2006,andconcerningchangesthathadoccurred
since2003.Firmswerealsointerviewedabouttheireconomicgoalsandontheeconomiccontextsinwhichorganizational
decisionsweremade.
TheCommunityInnovationSurvey(CIS)wasadministeredbytheFrenchInstituteforStatisticsandEconomicStudiesover
theperiod2006–2008;thesurveyisbasedontheOECDOsloManual.Firmsansweredquestionsregardinginnovationsthey
hadintroducedwithinthepastthreeyears.Thequestionnairewassentto25,000legalunitsandtheresponseratewasalso
very high, 81%. The CIS survey is mandatory for firms with morewith 250 employees or more so has a more important
representationfromfirmswithmorethan250employees.
TheAnnualEnterpriseSurveyisanannualsurveyconductedbytheFrenchMinistryofIndustrytocollectbasicdataonthe
structureofsurveyedfirmssuchasbusinessactivities,sizeandlocation.TheEAEisamandatorysurveyandthesamplewe
usecomprises80,000enterprisesthataresurveyedeachyear.
1 Moredetailsaboutthedesignandscopeofthissurveyareavailableonwww.enquetecoi.net:SurveyCOI-TIC2006-INSEE-CEE/TreatmentsCEE.
2 More details about the design and scope of this survey are available on http://www.insee.fr/fr/methodes/default.asp?page¼sources/sou-enq-
communaut-innovation-cis.htm.
3 More details about the design and scope of this survey are available on http://www.insee.fr/fr/methodes/default.asp?page¼definitions/enquete-
annuelle-entreprises.htm.
4 From2003to2006,theaverageannualrealGDPgrowthwas1.9,whichisalmostapointlowerthantheOECDaverageannualrealGDPgrowth(2.75)
duringthatperiod(OECD,2011).
M.A.Delmas,S.Pekovic/LongRangePlanning48(2015)80–94 85
Perceived
Downturn
Market
Conditions
Firm Resources and
Firm Strategies
Organization
H1 Environmental
Standards
Cost reduction
Innovation/
H5 a,b H5 c,d,e Research
capacity
Quality/
Differentiation
Vertical
Integration
Adoption of Energy,
H2 Material and Natural H3
Resource Efficiency
Practices
Figure1. Thedriversofresourceefficiencystrategies
ThethreedatasetsarelinkedbyfirmidentificationcodenamedSIREN.Aftermergingthesesurveys,weobtainasampleof
5,877observations.OursamplecontainsfirmsthathaveahighernumberofemployeesascomparedtotheCISsurvey,which
isexpectedsincebiggerfirmstendtohavemoreresourcestorespondtoquestionnairesoraremandatedtodosoasisthecase
withtheCISsurvey.However,oursamplestillincludesabroadrangeoffirmsizes(from18employeestomorethan100,000).
Thesurveysdonotincludethespecifictitleoftherespondentbutweknowthat40%inoursamplebelongtogeneraland
uppermanagementand30%fromthefinanceandaccountingdepartment.Theaverageyearsofseniorityinthefirmis13.5.
WedescribebelowthevariablesusedinourstudyandprovidereferencestothedatabasesinTable1.
Dependentvariable
Resourceefficiencystrategies
Inordertoanalyzethedeterminantsofinvestmentsinenergyandresourceefficiencystrategies,weconstructaresource
efficiencybinaryvariablewhichtakesthevalueof1,if:a)thefirmhasintroducedinnovativestrategiestoreduceenergyuse
perunitofoutput;and/orb)thefirmhasintroducedinnovativestrategiestoreducematerialuseperunitofoutput.5
Independentvariables
Marketconditions
In order to examine the impact of market conditions on firms’ investments in resource efficiency, we use a variable
indicatingtheevolutionofthemarketconditionsofthemainactivityofthefirmsince2003.Threedifferentmarketcon-
ditionsareconsidered:1)downmarketconditions;2)steadymarketconditions;and3)growingmarketconditions.Higher
numbersforthisvariablesignifymoreunfavorablemarketconditions.
Costleadershipstrategy
We introduce avariable that representsthe level of strategic importance attributed toproviding competitivelypriced
productsandservices.Thevariableiscodedfrom1,representingverylowstrategicimportance,to4,representingveryhigh
strategicimportance.
5 CISindustryquestionnaire.Question11a.Inthelastthreeyears,hasyourfirmintroducedaproductorserviceinnovation,aprocessormarketing
innovationbringingenvironmentalbenefitsfortheproductionofproductsorservices?1)Reductionintheuseofrawmaterial(includingpackaging)by
unitproduced,2)Reductionofenergyconsumptionbyunitproduced.
86 M.A.Delmas,S.Pekovic/LongRangePlanning48(2015)80–94
Table1
Definitionofvariablesandsamplestatistics
Variable Description Mean SD Min Max
Resourceefficiencya Thefirmhasadoptedinnovative 0.56 0.50 0.00 1.00
strategiestoreducetheuseofenergy,
resourceand/ormaterialperunitof
production
Energyefficiencya Thefirmhasadoptedinnovative 0.47 0.50 0.00 1.00
strategiestoreducetheuseenergyper
unitofproduction
Materialefficiencya Thefirmhasadoptedinnovative 0.44 0.50 0.00 1.00
strategiestoreducetheuseofresource
and/ormaterialperunitofproduction
1.Independent
2.Variables
MarketConditionsb Perceivedevolutionofthemarketofthe 1.90 0.72 1.00 3.00
mainactivityofthefirmsince2003:
DOWN(¼3)STEADY(¼2)GROWING
(¼1)
Resourceefficiency ¼1investmentinresourceefficiency 2.98 1.04 1.00 4.00
(cid:2)Marketcondition practiceswhenmarketperformanceis
down;
¼2investmentininnovativeresource
efficiencystrategieswhenmarket
performanceissteady;
¼3investmentininnovativeresource
efficiencystrategieswhenmarket
performanceisgrowing;
¼0noinvestmentininnovative
resourceefficiencystrategies
Costleadershipstrategyb Strategicimportanceattributedto 3.35 0.64 1.00 4.00
competitivepricedproductsand
services
Quality/differentiation Strategicimportanceattributedto 3.62 0.53 1.00 4.00
strategyb productandservicequalitystrategy
Environmentalstandardsb RegisteredforISO14001,organic 0.40 0.49 0.00 1.00
labelingorfairtrade
Dummyvariable
R&Da R&Dactivities(internalorexternal) 0.56 0.50 0.00 1.00
Verticalintegrationb Productionorganizedinternally 0.88 0.33 0.00 1.00
3.Controls
Regulationb Since2003,thefirmhasbeenaffected 0.27 0.82 1.00 4.00
bychangeinregulations,standards
(health,environment,workerrights,
etc.)
Qualitystandardb RegisteredwithISO9000,EAQF,etc. 0.72 0.45 0.00 1.00
Holdingb Belongstoaholdinggroup 0.83 0.37 0.00 1.00
Exportc Shareofexportsintotalsales(V) 0.19 0.27 0.00 1.00
Profitc Firmprofit(V) 4,2095.49 34,3994.3 (cid:3)571,691 6,619,330
Sizeb Numberofemployees 2,727.59 9,824.86 18.00 111,956.00
Sectorb Agrifood,consumptiongoods,carsandequipment,intermediategoods,energy,construction,commercial,transport,
financialandreal-estateactivities,businessservicesandindividualservices
a VariableswereretrievedfromtheCISdatabase;
b VariablesretrievedfromtheCOIdatabase;
c VariablesretrievedfromtheEAEdatabase.
Quality/differentiationstrategy
We introduce a variable that represents the level of strategic importance the firm allocates to the quality of its
products or services. The variable is coded from 1, very low strategic importance, to 4, very high strategic
importance.
Environmentalstandards
Weincludeabinaryvariable,coded1,ifthefirmwasregisteredaccordingtooneofthefollowingstandardsin2006:ISO
14001standard;organiclabeling;fairtrade;anothertypeofenvironment-relatedstandard.Unfortunately,thedatabasedoes
notdistinguishbetweenthesestandards.
R&D
WeintroducebinaryvariableindicatingwhetherthefirmundertakesitsR&Ddevelopmentactivitiesinternally(coded1)
orexternally(coded0).
M.A.Delmas,S.Pekovic/LongRangePlanning48(2015)80–94 87
Verticalintegration
We introduce a binary variable, coded 1, if the firm organizes its production activities internally or if it they are
subcontracted.
Controls
Regulation
Researchhasshownthattheregulatorycontextisasignificantdriveroffirminvestmentsingreenstrategies(Kounetas
andTsekouras,2008;DelmasandMontes-Sancho,2010).Hence,weincludeavariablerepresentingwhetherthefirmhas
beenaffectedbychangeinregulations,standards(health,environment,workerrights,etc.)since2003.
Qualitystandards
Previousempiricalfindingssupportthenotionthatqualitypracticespositivelyinfluenceinnovationperformance,since
qualitypractices,inboththeirhumanandtechnologicaldimensions,helptocreateanenvironmentandaculturethatsupport
innovation(DarnallandEdwards,2006;PekovicandGalia,2009).Wethereforeincludeabinaryvariablerepresentingthe
adoptionofqualitystandardsbythefirm.
Holding
Beingpartofaholdingcompanycouldplayanimportantroleinresourceefficiencyinvestment.Thismightbebecause
firms that belong to a holding have more financial resources available for investment in new technologies (Darnall and
Edwards, 2006; Pekovic, 2010; Zyglidopoulos, 2002). Hence, we include a dummy variable that takes a value of 1 when
thefirmbelongstoaholding.
Export
Researchhasshownfirmexportstobeadriveroftheadoptionofgreenstrategies(DelmasandMontiel,2009).Weusea
continuousvariablerepresentingthefirm’svolumeofexportdividedbythefirm’ssales.
Profit
Limited access to capital may prevent resource efficiency measures from being implemented (Jaffe and Stavins,1994;
Kablan,2003).Weincludeacontinuousvariablethatindicatesafirm’sprofit.
Size
Mostempiricalstudieshavefoundthattheprobabilityofinvestinginresourceefficiencystrategiesincreaseswithfirm
size(e.g.,Ley,2010;KounetasandTsekouras,2008;BrunnermeierandCohen,2003).Firmsizeismeasuredbyacontinuous
variablerepresentingthenumberofemployeeswithinthefirm.
Thevariablesusedinestimation,aswellastheirdefinitionsandsamplestatistics,arepresentedinTable1.Noproblemof
multicollinearitywasdetected(Appendix1).
Estimationstrategy
First,usingalogitregressionmodel,weinvestigatethedeterminantsoffirm’sdecisiontoinvestinenergyresourceef-
ficiencystrategies.Thelogitregressiontakesthefollowingform:
X13
Y(cid:4) ¼ aþ bX þm; i ¼ 1;2;:::;N: (1)
i i i i
i¼1
whereXirepresentsthevectorofvariablesforinvestmentinenergyefficiencystrategiessuchasmarketconditions,cost
leadership,EnvironmentalStandards,R&D, verticalintegration,regulation, quality/differentiationstrategy,QualityStan-
dards, holding, export, profit, size, sector activity; b1 (cid:3) b13 are slope coefficients to be estimated and a and m are the
interceptandthedisturbanceterm,respectively.Themodeloffirms’energyresourceefficiencyinvestmentchoiceisstated
asadiscrete-choicemodel,withthedummyvariablesindicatingenergyresourceefficiencyinvestment,asthedependent
variablesYi:
Y ¼ 1 if Y(cid:4) >0;
i i (2)
Y ¼ 0 otherwise:
i
Wespecifiedlogisticdistributionsformandmaximizedthelog-likelihoodofthelogitmodels(Greene,2003)toestimate
models’parametersuptoapositiveconstant.
Second,toinvestigateresourceefficiencyinvestmentunderdifferentmarketconditions,wecreateadependentvariable,
denotedResourceEfficiencyxMarketCondition.Thisvariablerepresentswhetherinvestmentsarerealizedindown,steadyor
growingmarketconditions.Onthebasisofthisclassification,wehavecreatedavariableRE1jthattakesthevalueof1,ifthe
88 M.A.Delmas,S.Pekovic/LongRangePlanning48(2015)80–94
firmisinvestinginresourceefficiencywhenthemarketperformanceisdown;2,ifthefirmisinvestinginresourceefficiency
whenthemarketperformanceissteady;3,ifthefirmisinvestinginresourceefficiencywhenthemarketperformanceis
growing;and0,ifafirmisnotinvestinginresourceefficiency.
We assume that firms choose one of the mutually exclusive alternatives characterized by our categorical variable.
This variable reflects four distinct unordered alternatives: Resource Efficiency Investment when market performance is
down (alternative j ¼ 1), Resource Efficiency Investment when market performance is steady (j ¼ 2), Resource Effi-
ciencyInvestmentwhenmarketperformanceisdown(alternativej¼3)andNoResourceEfficiencyInvestment(j¼0).
A multinomial logit model was used to evaluate the impact of the firm’s characteristics on resource efficiency
investments.
Inthemultinomiallogitmodel,theprobabilitythatthefirmibelongstothecategoryofinvestorsdeterminedbydifferent
marketsituationj,cj¼0,1,2,3,isdefinedby:
(cid:2) (cid:3) (cid:2) (cid:3)
b b
Exp x Exp x
ProbðRE ¼ jÞ ¼ P i j ¼ P i j (1)
i 2k¼0ExpðxibkÞ 1þ 2k¼0ExpðxibkÞ
whereXirepresentsthevectorofvariablesforfirmi(costleadership,ES,R&D,verticalintegration,regulation,quality/dif-
ferentiationstrategy,QS,holding,export,profit,size,sectoractivity);b1(cid:3)b12areslopecoefficientstobeestimated.
MultinomiallogitmodelsarevalidundertheIndependenceofIrrelevantAlternatives(IIA)assumptionthatstatesthatthe
characteristicsofoneparticularchoicealternativedonotimpacttherelativeprobabilitiesofchoosingotheralternatives.We
performboththeHaussmannandSmall-HsiaoteststotestthevalidityoftheIIAassumption.Theresultsofthetestsconfirm
theindependenceofirrelevantalternativesinallcategories.
Results
The descriptive statistics indicate that3,295 firms representing 56% of the firms in oursample (5,877 firms)invest in
resourceefficiencystrategiesdividedinto46.70%inenergyefficiency,and44.22%inmaterialefficiency.Outofoursampleof
3,295firms,only9.87%(580firms)investinresourceefficiencyindownmarketconditions,ascomparedto25.98%(1527
firms),insteadymarketconditionsand20.21%(1188)ingrowingmarketconditions.
TheresultsofthelogitregressionandmultinomialregressionsarepresentedinTable2.Inthefirstcolumn,wepresentthe
logitresults;thesecondcolumnshowstheresultsofthedeterminantsofresourceefficiencyinvestmentswhenthemarketis
downascomparedtonoinvestment;thethirdcolumnshowsthedeterminantsofresourceefficiencyinvestmentwhenthe
marketisgrowingcomparedtothenoinvestmentsituation.
Incolumn1,weobservethatthevariablerepresentingmarketconditionsisnegativeandsignificant,indicatingthatfirms
are less likelytoinvest in resource efficiency when market conditions are worse. The marginal effects indicatethat con-
strainedmarketconditionsdecrease by5 points afirm’s probabilityof investingin resourceefficiency.Thisconfirmshy-
pothesisH1bbutcontradictshypothesisH1a.
Furthermore,asexpected,firmsshowinghighvaluesforthevariablesrepresentingcostleadershipstrategy,investments
in environmental standards, R&D and vertical integration are more likely to invest in resource efficiency strategies. This
confirmsourhypothesesH2a,H3andH4.However,thequality/differentiationstrategyvariableisnon-significantandH2bis
thereforenotconfirmed.Thisnon-significantfindingindicatesthatquality/differentiationorientedfirmsarenotdrivingthe
adoptionofresourceefficiencystrategies.
Turning to the control variables, we find that larger firms, with higher shares of exports, that have adopted quality
standards,arealsomorelikelytoinvestinresourceefficiencystrategies.Thisconfirmspreviousstudies(e.g.,Darnalland
Edwards,2006;Schleich,2009;PekovicandGalia,2009;PorterandVanDerLinde,1995;Conrad,1997;Malueg,1989;Van
RaaijandVerhallen,1983).Theresults,regardingthenegativeandsignificantcoefficientofourvariablerepresentingregu-
lation,mightindicatethatchangesinregulationmightbeabarriertotheadoptionofinnovativeresourceefficiencystrategies
(Delmas,2002a,b).Itispossiblethatsuchregulatorychangesincreasedtheenvironmentaluncertaintyandmaderesource
efficiencystrategieslessattractive.
Regardingthedeterminantsofresourceefficiencyinvestmentswhenthemarketisdown,comparedtothenoinvestment
situation(thesecondcolumnofTable2),weobservethatcostleadershipstrategy,environmentalstandardsandinternalR&D
are significant predictors of investments in resource efficiency strategies. This confirms hypotheses H5a, H5c, and H5d.
Similarly,thevariablerepresentingverticalintegrationispositivelyrelatedtoinvestmentsinresourceefficiencystrategies,
andthisconfirmsourhypothesisH5e.Overallfirmswithcostleadershipstrategy,internalR&D,environmentalstandardsand
thatareverticallyintegratedare24%morelikelytoadoptresourceefficiencystrategieswhentheyperceivedownmarket
conditions.Thevariablequality/differentiationstrategyisnon-significantandthereforenotapredictoroftheadoptionof
resourceefficiencystrategies.
Turning to the control variables, larger firms, and firms belonging to a holding are more likely to invest in resource
efficiency strategies, indicating some potential economies of scale associated with the adoption of such strategies.
Furthermore,exportnegativelyinfluencesafirm’sprobabilityofinvestinginresourceefficiencywhenthemarketisgoing
down.
M.A.Delmas,S.Pekovic/LongRangePlanning48(2015)80–94 89
Table2
TheDeterminantsoftheadoptionofenergyandresourceefficiencystrategies
(1) (2) (3)
Variables Resourceefficiency Resourceefficiency(cid:2)Marketdown Resourceefficiency(cid:2)Marketgrow
strategies (referencenoinvestment) (referencenoinvestment)
Logitmodel Multinomialmodel
Marketconditions (cid:3)0.19***
(0.04)
Costreduction 0.33*** 0.44*** 0.28***
(0.05) (0.08) (0.07)
Quality/diffstrategy 0.08 0.05 0.22***
(0.06) (0.09) (0.08)
Envstandard 0.50*** 0.55*** 0.39***
(0.07) (0.11) (0.09)
R&D 1.89*** 1.40*** 2.00***
(0.07) (0.11) (0.10)
Verticalintegration 0.23*** 0.43*** (cid:3)0.02
(0.10) (0.16) (0.13)
Regulation (cid:3)0.10*** 0.02 (cid:3)0.02
(0.04) (0.06) (0.05)
Qualstandard 0.41*** 0.11 0.82***
(0.08) (0.13) (0.12)
Holding 0.25*** 0.38*** 0.18
(0.09) (0.14) (0.12)
Export 0.29* (cid:3)1.00*** 0.66***
(0.15) (0.25) (0.18)
Profit 0.00*** (cid:3)0.00 0.00***
(0.00) (0.00) (0.00)
Size 0.00*** 0.00** 0.00*
(0.00) (0.00) (0.00)
Agrifood 0.03 0.24 (cid:3)0.66***
(0.13) (0.18) (0.19)
Consumptiongoods 0.29** 0.20 0.46***
(0.14) (0.21) (0.18)
Carsandequipment (cid:3)0.37*** (cid:3)0.06 (cid:3)0.36***
(0.11) (0.16) (0.13)
Energy 0.61*** (cid:3)0.60 0.74***
(0.27) (0.48) (0.30)
Construction 0.86*** (cid:3)0.85*** 1.36***
(0.16) (0.35) (0.19)
Commercial 0.37*** 0.38** (cid:3)0.17
(0.13) (0.18) (0.18)
Transport 0.92*** (cid:3)0.19 1.41***
(0.14) (0.26) (0.17)
Financialandrealestate 1.91*** (cid:3)14.24 2.58***
(0.24) (624.11) (0.29)
Servicesforfirms (cid:3)0.01 (cid:3)0.65*** 0.30**
(0.12) (0.20) (0.15)
Servicesforindividuals 0.63*** (cid:3)0.12 0.76***
(0.19) (0.31) (0.26)
Constant (cid:3)2.78*** (cid:3)4.66*** (cid:3)4.95***
(0.31) (0.48) (0.41)
PseudoR2 0.21 0.15
Correctlyclassified 73.80% 82.92% 78.83%
Observations 5,877 5,877 5,877
(*),(**),(***)indicateparametersignificanceatthe10,5and1percentlevel,respectively.
Thethirdcolumn(Table2)representstheresultsrelatedtothedeterminantsofresourceefficiencyinvestmentwhenthe
marketisgrowing,comparingtoanoinvestmentsituation.export,costleadership,qualitystandards,environmentalstan-
dards,R&Dandsizearesignificant,asintheresultsofthelogitestimates(firstcolumn).Thisisnotsurprising,sincethese
investmentsrepresentalargershareoftheoverallinvestments.Additionally,profitpositivelyinfluencesafirm’sprobability
ofinvestinginresourceefficiencywhenthemarketisgrowingcomparedtothenoinvestmentsituation.Verticalintegration
isnon-significantwhichisconsistentwithourargumentationthatfavoredverticalintegrationindownturnmarketcondi-
tions. The variable regulation is also non-significant, indicating that regulation is not a barrier for managers perceiving
growingmarketconditions.Interestingly,thevariablerepresentingquality/differentiationstrategyispositiveandsignificant.
Thisindicatesthatsuchfirmsaremorelikelytoinvestinresourceefficiencystrategiesinperceivedgrowingmarkingcon-
ditionsalthoughtoaslightlylesserextentthancostreductionorientedfirms.