Abstract
Although the same environmental regulations apply to all regions in China, legal enforcement can be different due to local economic development priorities. There is still a lack of knowledge about how regional disparities affect the operating performance results of the implementation of corporate environmental management practices, thus providing little information for foreign companies when they invest and develop their production base in China. To fill this research gap, this paper collects data from the Fortune 500 Chinese firms to investigate the moderating role of regional disparities in affecting the performance results of corporate environmental management efforts based on the institutional theory. The disclosed corporate environmental responsibility (CER) practices serve as proxy to represent corporate environmental management practices. Content analysis approach was applied to collect and analyze CER practices published in the corporate reports of Chinese manufacturers. The results show that CER has a positive impact on operating income, while regional disparities influence the relationship between CER and corporate operating income. Specifically, CER and operating income are positively related in Eastern China; on the contrary, they are negatively related in Western China. This paper adds to the body of knowledge about environmental discrepancies in the same emerging economy, and provides insights for systematic consideration in terms of the issues of government environmental regulations and corporate environmental strategies.
Similar content being viewed by others
Abbreviations
- CER:
-
Corporate environmental responsibility
- CSR:
-
Corporate social responsibility
- EKC:
-
Environmental Kuznets curve
- EPL:
-
Environmental protection law
- KLD:
-
Kinder Lydenberg domini
- GDP:
-
Gross domestic product
- GER:
-
Governmental environmental responsibility
- NRBV:
-
Natural-resource-based view
References
Aiken, L. S., & West, S. G. (1991). Multiple regression: Testing and interpreting interactions. Newbury Park: Sage.
Albertini, E. (2013). Does environmental management improve financial performance? A meta-analytical review. Organization & Environment, 26(4), 431–457.
Ambec, S., & Lanoie, P. (2008). Does it pay to be green? A systematic overview. Academy of Management Perspectives, 22(4), 45–62.
Ang, S. H. (2008). Competitive intensity and collaboration: Impact on firm growth across technological environments. Strategic Management Journal, 29(10), 1057–1075.
Aragon-Correa, J. A., & Sharma, S. (2003). A contingent resource-based view of proactive corporate environmental strategy. Academy of Management Review, 28(1), 71–88.
Asif, M., Searcy, C., Zutshi, A., & Fisscher, O. A. M. (2013). An integrated management systems approach to corporate social responsibility. Journal of Cleaner Production, 56, 7–17.
Auty, R. M. (1993). Sustaining development in mineral economies: The resource curse thesis. London: Routledge Press.
Bai, X., Shi, P., & Liu, Y. (2014). Realizing China’s urban dream. Nature, 509(7499), 158–160.
Bansal, P., & Roth, K. (2000). Why companies go green: A model of ecological responsiveness. Academy of Management Journal, 43(4), 717–736.
Bardhan, P., & Mookherjee, D. (2006). Decentralization and local governance in developing countries: A comparative perspective. Cambridge: MIT Press.
Beijing Daily. (2015). Accessed December 6, 2015, from http://www.ben.com.cn/10cj/201508/08/t20150808_9853434.html).
Borland, H., & Lindgreen, A. (2013). Sustainability, epistemology, ecocentric business, and marketing strategy: Ideology, reality, and vision. Journal of Business Ethics, 117(1), 173–187.
Brammer, S., & Millington, A. (2008). Does it pay to be different? An analysis of the relationship between corporate social and financial performance. Strategic Management Journal, 29(12), 1325–1343.
Brown, B., & Perry, S. (1994). Removing the financial performance halo from Fortune’s “Most Admired” companies. Academy of Management Journal, 37(5), 1347–1359.
Busch, T., & Hoffmann, V. H. (2011). How hot is your bottom line? Linking carbon and financial performance. Business and Society, 50(2), 233–265.
Buysse, K., & Verbeke, A. (2003). Proactive environmental strategies: A stakeholder management perspective. Strategic Management Journal, 24(5), 453–470.
Campbell, J. L. (2007). Why would corporations behave in socially responsible ways? An institutional theory of corporate social responsibility. Academy of Management Review, 32(3), 946–967.
Cao, S., Li, S., Ma, H., & Sun, Y. T. (2015). Escaping the resource curse in China. Ambio, 44(1), 1–6.
Chan, R. Y. K. (2005). Does the natural-resource-based view of the firm apply in an emerging economy? A survey of foreign invested enterprises in China. Journal of Management Studies, 42(3), 625–672.
Chan, T.-Y., Wong, C. W. Y., Lai, K. H., Lun, V. Y. H., Ng, C. T., & Ngai, E. W. T. (2015). Green service: construct development and measurement validation. Production and Operations Management,. doi:10.1111/poms.12407.
Chauvin, K. W., & Hirschey, M. (1993). Advertising, R&D expenditures and the market value of the firm. Financial Management, 22(4), 128–140.
Chen, M. H., Chang, Y. Y., & Lee, C. Y. (2015a). Creative entrepreneurs’ guanxi networks and success: Information and resource. Journal of Business Research, 68(4), 900–905.
Chen, Y., Tang, G. Y., Jin, J. F., Li, J., & Paille, P. (2015b). Linking market orientation and environmental performance: The influence of environmental strategy, employee’s environmental involvement, and environmental product quality. Journal of Business Ethics, 127(2), 479–500.
Chow, G. C. (2008). China’s energy and environmental problems and policies. Asia-Pacific Journal of Accounting & Economics, 15(1), 57–70.
Clarkson, P. M., Li, Y., Richardson, G. D., & Vasvari, F. P. (2011). Does it really pay to be green? Determinants and consequences of proactive environmental strategies. Journal of Accounting and Public Policy, 30(2), 122–144.
Cordeiro, J. J., & Sarkis, J. (1997). Environmental proactivism and firm performance: Evidence from security analyst earnings forecasts. Business Strategy and the Environment, 6(2), 104–114.
Cornelius, N., Wallace, J., & Tassabehji, R. (2007). An analysis of corporate social responsibility, corporate identity and ethics teaching in business schools. Journal of Business Ethics, 76(1), 117–135.
Costanza, R., Kubiszewski, I., Giovannini, E., Giovannini, E., Lovins, H., McGlade, J., et al. (2014). Time to leave GDP behind. Nature, 505(7483), 283–285.
Delmas, M., Hoffmann, V. H., & Kuss, M. (2011). Under the tip of the iceberg: Absorptive capacity, environmental strategy, and competitive advantage. Business and Society, 50(1), 116–154.
DiMaggio, P. J., & Powell, W. W. (1983). The iron cage revisited: institutional isomorphism and collective rationality in organizational fields. American Sociological Review, 48(2), 147–160.
Dongguan Sunshine Net. (2015 Accessed December 7, 2015, from http://news.sun0769.com/town/ms/201505/t20150516_5367400.shtml).
Duriau, V. J., Reger, R. K., & Pfarrer, M. D. (2007). A content analysis of the content analysis literature in organization studies: Research themes, data sources, and methodological refinements. Organizational Research Methods, 10(1), 5–34.
Endrikat, J., Guenther, E., & Hoppe, H. (2014). Making sense of conflicting empirical findings: A meta-analytic review of the relationship between corporate environmental and financial performance. European Management Journal, 32(5), 735–751.
Graves, S. B., & Waddock, S. A. (1999). A look at the financial-social performance nexus when quality of management is held constant. International Journal of Value-Based Management, 12, 87–99.
Grossman, G. M., & Krueger, A. B. (1991). Environmental impacts of a North American Free Trade Agreement. National Bureau of Economic Research Working Paper 3914, NBER, Cambridge MA.
Gunningham, N. (2009). Shaping corporate environmental performance: A review. Environmental Policy and Governance, 19, 215–231.
Hair, J. F., Anderson, R. E., Tatham, R. L., & Black, W. C. (1998). Multivariate data analysis. Upper Saddle River, NJ: Prentice Hall.
Hart, S. L., & Ahuja, G. (1996). Does it pay to be green? An empirical examination of the relationship between emission reduction and firm performance. Business Strategy and the Environment, 5(1), 30–37.
Hart, S. L., & Dowell, G. (2011). A natural-resource-based view of the firm: fifteen years after. Journal of Management, 37(5), 1464–1479.
Harwood, T. G., & Garry, T. (2003). An overview of content analysis. The Marketing Review, 3(4), 479–498.
Hassel, L. G., Nilsson, H., & Nyquist, S. (2005). The value relevance of environmental performance. European Accounting Review, 14(1), 41–61.
Hillman, A. J., & Keim, G. D. (2001). Shareholder value, stakeholder management, and social issues: What’s the bottom line? Strategic Management Journal, 22(2), 125–139.
Holder-Webb, L., Cohen, J. R., Nath, L., & Wood, D. (2009). The supply of corporate social responsibility disclosures among US firms. Journal of Business Ethics, 84(4), 497–527.
Holtbrügge, D., & Dögl, C. (2012). How international is corporate environmental responsibility? A literature review. Journal of International Management, 18(2), 180–195.
Hoskisson, R. E., Hitt, M. A., Wan, W. P., & Yiu, D. (1999). Theory and research in strategic management: Swings of a pendulum. Journal of Management, 25(3), 417–456.
Huang, Y., & Sternquist, B. (2007). Retailers’ foreign market entry decisions: An institutional perspective. International Business Review, 16(5), 613–629.
Jackson, G., & Apostolakou, A. (2009). Corporate social responsibility in Western Europe: An institutional mirror or substitute? Journal of Business Ethics, 94(3), 371–394.
Julian, S., & Ofori-Dankwa, J. (2013). Financial resource availability and corporate social responsibility expenditures in a sub-Saharan economy: The institutional difference hypothesis. Strategic Management Journal, 34(11), 1314–1330.
Kang, K. H., Lee, S., & Huh, C. (2009). Impact of positive and negative corporate social responsibility activities on company performance in the hospitality industry. International Journal of Hospitality Management, 29(1), 72–82.
Ke, S. (2010). Determinants of economic growth and spread-backwash effects in western and eastern China. Asian Economic Journal, 24(2), 179–202.
King, A. A., & Lenox, M. J. (2000). Industry self-regulation without sanctions: The chemical industry’s responsible care program. Academy of Management Journal, 43(4), 698–716.
King, A. A., & Lenox, M. J. (2002). Exploring the locus of profitable pollution reduction. Management Science, 48(2), 289–299.
Konar, S., & Cohen, R. A. (2001). Does the market value environmental performance? Review of Economics and Statistics, 83(2), 281–289.
Lai, K. H., Wong, C. W. Y., & Cheng, T. C. E. (2012). Ecological modernisation of Chinese export manufacturing via green logistics management and its regional implications. Technological Forecasting and Social Change, 79(4), 766–770.
Lankoski, L. (2008). Corporate responsibility activities and economic performance: A theory of why and how they are connected. Business Strategy and the Environment, 17(8), 536–547.
Leisinger, K. (2015). Business needs to embrace sustainability targets. Nature, 528(7581), 165.
Li, S., Fetscherin, M., Alon, I., Lattemann, C., & Yeh, K. (2010). Corporate social responsibility in emerging markets: The importance of the governance environment. Management International Review, 50(5), 635–654.
Li, S., Song, X., & Wu, H. (2015). Political connection, ownership structure, and corporate philanthropy in china: A strategic-political perspective. Journal of Business Ethics, 129(2), 399–411.
Liu, Z., Guan, D., Moore, S., Lee, H., Su, J., & Zhang, Q. (2015). Steps to China’s carbon peak. Nature, 522(7556), 279–281.
Marquis, C., Glynn, M. A., & Davis, G. F. (2007). Community isomorphism and corporate social action. Academy of Management Review, 32(3), 925–945.
Mazurkiewicz, P. (2004). Corporate environmental responsibility: Is a common CSR framework possible?. Washington, DC: World Bank.
Miao, X., Tang, Y., & Wong, C. W. Y. (2015a). Polluters migrate to China’s poor areas. Nature, 518(7540), 483.
Miao, X., Tang, Y., Wong, C. W. Y., & Zang, H. (2015b). The latent causal chain of industrial water pollution in China. Environmental Pollution, 196, 473–477.
Montabon, F., Sroufe, R., & Narasimhan, R. (2007). An examination of corporate reporting, environmental management practices and firm performance. Journal of Operations Management, 25(5), 998–1014.
Musgrave, R. A. (1959). Theory of public finance. New York: McGraw Hill.
Neuendorf, K. A. (2002). The content analysis guidebook. TousandOaks, CA: Sage Publications.
Orlitzky, M., Schmidt, F. L., & Rynes, S. L. (2003). Corporate social and financial performance: A meta-analysis. Organization Studies, 24(3), 403–441.
People’s Net. (2015). Accessed December 8, 2015, from http://travel.people.com.cn/n/2015/0115/c41570-26391640.html.
Porter, M. E. (1991). American’s green strategy. Scientific American, 264(4), 168.
Porter, M. E., & van der Linde, C. (1995). Green and competitive: Ending the stalemate. Harvard Business Review, 73, 120–134.
Preston, L. E., & O’Bannon, D. P. (1997). The corporate social-financial performance relationship. Business and Society, 36(4), 419–429.
Preuss, L. (2009). Ethical sourcing codes of large UK-based corporations: prevalence, content, limitations. Journal of Business Ethics, 88(4), 735–747.
Qian, G., Li, L., Li, J., & Qian, Z. (2008). Regional diversification and firm performance. Journal of International Business Studies, 39(2), 197–214.
Ruf, B. M., Muralidhar, K., Brown, R. M., Janney, J. J., & Paul, K. (2011). An empirical investigation of the relationship between change in corporate social performance and financial performance: A stakeholder theory perspective. Journal of Business Ethics, 32(2), 143–156.
Russo, M. V., & Fouts, P. A. (1997). A resource-based perspective on corporate environmental performance and profitability. Academy of Management Journal, 40(3), 534–559.
Russo, M. V., & Minto, A. (2012). Competitive strategy and the environment: A field of inquiry emerges. In P. Bansal & A. J. Hoffman (Eds.), The Oxford handbook on business and the natural environment (pp. 29–49). Oxford: University Press.
Searcy, C., & Buslovich, R. (2014). Corporate perspectives on the development and use of sustainability reports. Journal of Business Ethics, 121(2), 149–169.
Sharma, S., & Vredenburg, H. (1998). Proactive corporate environmental strategy and the development of competitively valuable organizational capabilities. Strategic Management Journal, 19(8), 729–753.
Shen, H. B., Xie, Y., & Chen, Z. R. (2012). Environmental protection, corporate social responsibility and its market response: Case study based on the environmental pollution incident of Zijin Mining Group Co., China Industrial. Economics, 286, 141–151. (in Chinese).
Sobhani, F. A., Amran, A., & Zainuddin, Y. (2009). Revisiting the practices of corporate social and environmental disclosure in Bangladesh. Corporate Social Responsibility and Environmental Management, 16(3), 167–183.
Song, M., Song, Y., Yu, H., & Wang, Z. (2013). Calculation of China’s environmental efficiency and relevant hierarchical cluster analysis from the perspective of regional differences. Mathematical and Computer Modelling, 58, 1084–1094.
Sun, Z., Li, Z., & Wang, J. (2006). Nature of ownership, debt covenants and accounting information: Evidences from Chinese listed companies. Management World, 22(10), 100–149. (in Chinese).
Surroca, J., Tribo, J. A., & Waddock, S. (2010). Corporate responsibility and financial performance: The role of intangible resources. Strategic Management Journal, 31(5), 463–490.
Tang, Y., Wu, S., Miao, X., Pollard, S. J. T., & Hrudey, S. E. (2013). Resilience to evolving drinking water contamination risks: A human error prevention perspective. Journal of Cleaner Production, 57, 228–237.
Tangpong, C. (2011). Content analytic approach to measuring constructs in operations and supply chain management. Journal of Operations Management, 29(6), 627–638.
Turban, D. B., & Greening, D. W. (1997). Corporate social performance and organizational attractiveness to prospective employees. Academy of Management Journal, 40(3), 658–672.
Ullmann, A. A. (1985). Data in search of a theory: A critical examination of the relationships among social performance, social disclosure, and economic performance of U.S. Firms. Academy of Management Review, 10(3), 540–557.
Vanhamme, J., Lindgreen, A., Reast, J., & van Popering, N. (2012). To do well by doing good: Improving corporate image through cause-related marketing. Journal of Business Ethics, 109(3), 259–274.
Vuontisjarvi, T. (2006). Corporate social reporting in the European context and human resource disclosures: An analysis of Finnish companies. Journal of Business Ethics, 69(4), 331–354.
Waddock, S. A., & Graves, S. M. (1997). The corporate social performance-financial performance link. Strategic Management Journal, 18(4), 303–319.
Wagner, M. (2010). The role of corporate sustainability performance for economic performance: A firm-level analysis of moderation effects. Ecological Economics, 69(7), 1553–1560.
Wagner, M., & Schaltegger, S. (2004). The effect of environmental strategy choice and environmental performance on competitiveness and economic performance: An empirical study of EU manufacturing. European Journal of Management, 22(5), 557–572.
Waldman, D. A., Siegel, D. S., & Javidan, M. (2006). Components of CEO transformational leadership and corporate social responsibility. Journal of Management Studies, 43, 1703–1725.
Wang, H., Choi, J., & Li, J. (2008). Too little or too much? Untangling the relationship between corporate philanthropy and firm financial performance. Organization Science, 19(1), 143–159.
Weber, M. (2008). The business case for corporate social responsibility: A company-level measurement approach for CSR. European Management Journal, 26(4), 247–261.
Wei, C., Ni, J., & Du, L. (2012). Regional allocation of carbon dioxide abatement in China. China Economic Review, 23(3), 552–565.
Wong, C. W. Y. (2013). Leveraging environmental information integration to enable environmental management capabilities and performance. Journal of Supply Chain Management, 49(2), 114–136.
Wong, C. W. Y., Lai, K. H., Shang, K.-S., & Lu, C.-S. (2014). Uncovering the value of green advertising for environmental management practices. Business Strategy and the Environment, 23(2), 117–130.
Wong, C. W. Y., Lai, K. H., Shang, K.-S., Lu, C.-S., & Leung, T. K. P. (2012). Green operations and the moderating role of environmental management capability of suppliers on manufacturing firm performance. International Journal of Production Economics, 140(1), 283–294.
Xinhua News Agency. (2015a). Accessed December 12, 2015, from http://news.xinhuanet.com/fortune/2015-10/29/c_1116983078.htm.
Xinhua News Agency. (2015b). Accessed December 6, 2015, from http://news.xinhuanet.com/politics/2015-08/06/c_128099340.htm.
Yang, H. (2014). China must continue the momentum of green law. Nature, 509(7502), 535.
Yang, H., Huang, X., Thompson, J. R., & Flower, R. J. (2015). Enforcement key to China’s environment. Science, 347(6224), 834–835.
Yue, Y. China Environmental News. (2011). Accessed May 29, 2015, from http://www.cenews.com.cn/xwzx/zhxw/ybyw/201102/t20110225_692939.html.
Zhang, B., Bi, J., Yuan, Z., Ge, J., Liu, B., & Bu, M. (2008). Why do firms engage in environmental management? An empirical study in China. Journal of Cleaner Production, 16(10), 1036–1045.
Zhang, B., & Cao, C. (2015). Four gaps in China’s new environmental law. Nature, 517(7535), 433–434.
Zhang, J., Shia, B., Yi, H., Ma, S., & Ma, C. (2015). Illness and medical and other expenditures: Observations from western and eastern China. BMC Health Services Research, 15(69), 1–10.
Zhang, Y.-X., & Wang, S.-R. (2010). Differences in development among children and adolescents in eastern and western China. Annals of Human Biology, 37(5), 658–667.
Zhao, M., Tan, J., & Park, S. H. (2014). From voids to sophistication: Institutional environment and MNC CSR crisis in emerging markets. Journal of Business Ethics, 122(4), 655–674.
Zhou, X. Y., Han, Y., & Wang, R. (2013). An empirical investigation on firms’ proactive and passive motivation for bribery in China. Journal of Business Ethics, 118(3), 461–472.
Acknowledgments
The authors thank the editors and reviewers for their valuable and insightful comments on earlier versions of the paper. This research was partially supported by the National Natural Science Foundation of China (Grant No. 71471047, Grant No. 71390522), the Humanities and Social Sciences Fund of Ministry of Education (Grant No. 15YJC630116), the Hong Kong Scholars Program (Grant No. XJ2013008), the Research Grants council of the Hong Kong Special Administrative Region of China (Grant No. PolyU 152170/14E), and the Hong Kong Polytechnic University (Grant No. G-YZ48).
Author information
Authors and Affiliations
Corresponding author
Ethics declarations
Conflict of interest
The authors declare that they have no other conflict of interest.
Research Involving Human and Animal Rights
This article does not contain any studies with human participants or animals performed by any of the authors.
Rights and permissions
About this article
Cite this article
Wong, C.W.Y., Miao, X., Cui, S. et al. Impact of Corporate Environmental Responsibility on Operating Income: Moderating Role of Regional Disparities in China. J Bus Ethics 149, 363–382 (2018). https://doi.org/10.1007/s10551-016-3092-z
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10551-016-3092-z