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The Impact of Competitors–Firm Power Divergence on Chinese SMES’ Environmental and Financial Performance

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Abstract

Competitor pressure is one of the major reasons that a SME engages in environmentally friendly or damaging activities. Extant research has argued that environmental strengths and concerns have mirror opposite relationships with stakeholder antecedents as well as with performance outcomes. We suggest this argument does not reflect the reality. Building on stakeholder management and Red Queen theories, we hypothesize that environmental strengths and concerns have differential relationships with competitors–firm power exchange and financial performance for Chinese SMEs. Results of ten interviews, a pretest, and a large-scale field study indicate that competitors–firm power divergence has a positive relationship with environmental strengths, yet the link between this divergence and environmental concerns does not exist. Further, environmental strengths mediate the relationship between competitors–firm power divergence and financial performance of Chinese SMEs.

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Authors and Affiliations

  1. Saunders College of Business, Rochester Institute of Technology, Max Lowenthal Building, 107 Lomb Memorial Dr., Rochester, NY, 14623-5603, USA

    Zhi Tang

  2. John Cook School of Business, Saint Louis University, 3674 Lindell Blvd., DS 469A, St. Louis, MO, 63108, USA

    Jintong Tang

Authors
  1. Zhi Tang
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Correspondence to Zhi Tang.

Appendix: Environmental Performance Scales

Appendix: Environmental Performance Scales

Strengths

  1. (a)

    The company derives substantial revenues from innovative remediation products, environmental services, or products that promote the efficient use of energy, or it has developed innovative products with environmental benefits. (The term “environmental service” does not include services with questionable environmental effects, such as landfills, incinerators, waste-to-energy plants, and deep injection wells.) Through 1994, “substantial revenues” was specified as more than 4 % of total revenues.

  2. (b)

    Pollution prevention The company has strong pollution prevention programs, including both emissions and toxic-use reduction programs.

  3. (c)

    Recycling The company is either a substantial user of recycled materials in its manufacturing processes, or a major firm in the recycling industry.

  4. (d)

    The company derives substantial revenues from alternative fuels. The term “alternative fuels” includes natural gas, wind power, and solar energy. The company has demonstrated an exceptional commitment to energy efficiency programs or the promotion of energy efficiency.

  5. (e)

    The company is a signatory to the CERES Principles, publishes a notably substantive environmental report, or has notably effective internal communications systems in place for environmental best practices. KLD began assigning strengths for this issue in 1996.

  6. (f)

    Management systems. The company has demonstrated a superior commitment to management systems through ISO 14001 certification and other voluntary programs.

  7. (g)

    Other strengths The company has undertaken noteworthy environmental initiatives not covered by other KLD ratings.

Concerns

  1. (h)

    Hazardous waste The company has substantial liabilities for hazardous waste, or has recently paid significant fines or civil penalties for waste management violations.

  2. (i)

    Regulatory problems The company has recently paid substantial fines or civil penalties for, or it has a pattern of controversies regarding, violations of air, water, or other environmental regulations.

  3. (j)

    The company is among the top manufacturers of ozone depleting chemicals such as HCFCs, methyl chloroform, methylene chloride, or bromines.

  4. (k)

    Substantial emissions The company’s emissions of toxic chemicals into the air and water from individual plants are notably high.

  5. (l)

    The company’s legal emissions of toxic chemicals (as defined by and reported to the EPA) from individual plants into the air and water are among the highest of the companies followed by KLD.

  6. (m)

    The company is a substantial producer of agricultural chemicals, i.e., pesticides or chemical fertilizers.

  7. (n)

    Other concerns The company has been involved in an environmental controversy not covered by other KLD ratings.

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Tang, Z., Tang, J. The Impact of Competitors–Firm Power Divergence on Chinese SMES’ Environmental and Financial Performance. J Bus Ethics 136, 147–165 (2016). https://doi.org/10.1007/s10551-014-2518-8

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