Hostname: page-component-586b7cd67f-2brh9 Total loading time: 0 Render date: 2024-11-24T03:56:13.092Z Has data issue: false hasContentIssue false
  • English
  • Français

Does It Pay to Be Green? Financial Benefits of Environmental Labeling among Chinese Firms, 2000–2005

Published online by Cambridge University Press:  15 July 2015

Lihua Wang ,
Zhiyu Cui  and
Xiaoya Liang
Lihua Wang
Affiliation:
San Francisco State University, USA
Zhiyu Cui
Affiliation:
Fudan University, China
Xiaoya Liang
Affiliation:
Fudan University, China
Get access Rights & Permissions [Opens in a new window]

Abstract

Drawing on economic, sociological, and strategic perspectives, we use data of a large sample of 936 Chinese manufacturing firms in the period from 2000 to 2005 to examine how environmental labeling may affect a firm's financial performance. We argue that reducing information asymmetry, increasing legitimacy, and differentiating strategically through environmental labeling may prompt customers to patronize the firm, thereby enhancing firm performance. However, not all firms benefit equally; environmental labeling conveys fewer benefits for larger firms and for firms listed in a stock market, because they are less threatened by information asymmetry or insufficient organizational legitimacy. Our findings suggest that environmental labeling has generally limited influence on financial performance, but for small and unlisted firms, environmental labeling increases sales.

Keywords

Chinaeconomic performanceenvironmental labelinggreen managementsustainability
Type
Special Issue Articles
Information
Management and Organization Review , Volume 11 , Issue 3: Special Issue Building Sustainable Organizations in China , September 2015 , pp. 493 - 519
Copyright
Copyright © The International Association for Chinese Management Research 2015 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Ann, G., Zailani, S., & Wahid, N. 2006. A study on the impact of environmental management system (EMS) certification towards firms’ performance in Malaysia. Management of Environmental Quality, 17 (1): 73–93.Google Scholar
Andrews, R. L. 1992. Economics of information and heterogeneous products. Journal of Economic Psychology, 13 (3): 399–419.CrossRefGoogle Scholar
Arrow, K. 1974. The Limits of organization. New York: Norton.Google Scholar
Bansal, P., & Clelland, I. 2004, Talking trash: Legitimacy, impression management, and unsystematic risk in the context of the natural environment, Academy of Management Journal, 47 (1): 93–103.Google Scholar
Barnett, M. L. 2006. Finding a working balance between competitive and communal strategies. Journal of Management Studies, 43 (8): 1753–1773.Google Scholar
Bjørner, T. B., Hansen, L. G., & Russell, C. S. 2004. Environmental labeling and consumers’ choice – an empirical analysis of the effect of the Nordic Swan. Journal of Environmental Economics and Management, 47 (3): 411–434.CrossRefGoogle Scholar
Bushman, R. M., Piotroski, J. D., & Smith, A. J. 2004. What determines corporate transparency? Journal of Accounting Research, 42 (2): 207–252.Google Scholar
Caswell, J. A. 1998. How labeling of safety and process attributes affects markets for food. Agricultural and Resource Economics Review, 27 (2): 151–158.Google Scholar
Caswell, J. A., & Mojduszka, E. M. 1996. Using information labeling to influence the market for quality in food products. American Journal of Agricultural Economics, 78 (5): 1248–1253.CrossRefGoogle Scholar
Chien, C. C., & Peng, C. W. 2012. Does going green pay off in the long run? Journal of Business Research, 65 (11): 1636–1642.Google Scholar
Choi, J., & Wang, H. 2009. Stakeholder relations and the persistence of corporate financial performance. Strategic Management Journal, 30 (8): 895–907.CrossRefGoogle Scholar
Christmann, P. 2000. Effects of ‘‘best practices’’ of environmental management on cost competitiveness: The role of complementary assets. Academy of Management Journal, 43 (4): 663–680.CrossRefGoogle Scholar
Delmas, M. A., & Grant, L. E. 2014. Eco-labeling strategies and price-premium: The wine industry puzzle. Business & Society, 53 (1): 6–44.CrossRefGoogle Scholar
Donaldson, T., & Dunfee, T. W. 1994. Toward a unified conception of business ethics: Integrative social contracts theory. Academy of Management Review, 19 (2): 252–284.Google Scholar
Dorfman, M. H., Muir, W. R., & Miller, C. G. 1992. Environmental dividends: Cutting more chemical wastes. New York: INFORM.Google Scholar
Dowell, G., Hart, S., & Yeung, B. 2000. Do corporate environmental standards create or destroy market value? Management Science, 46 (8): 1059–1074.Google Scholar
Dowling, J., & Pfeffer, J. 1975. Organizational legitimacy: Social values and organizational behavior. Pacific Sociological Review, 18 (1): 122–136.Google Scholar
Etzion, D. 2007. Research on organizations and the natural environment, 1992-present: A review. Journal of Management, 33 (4): 637–664.CrossRefGoogle Scholar
Fombrun, C., & Shanley, M. 1990. What's in a name? Reputation building and corporate strategy. Academy of Management Journal, 33 (2): 233–258.Google Scholar
Freeman, R., & Evan, W. 1990. Corporate governance: A stakeholder interpretation. Journal of Behavioral Economics, 19 (4): 337–359.Google Scholar
Friedman, M. 1970. The social responsibility of business is to increase its profits. New York Times Magazine, September 13, p. 33.Google Scholar
Gil, M. J. A., Jiménez, J. B., & Lorente, J. J. C. 2001. An analysis of environmental management, organizational context and performance of Spanish hotels. Omega, 29 (6): 457– 471.Google Scholar
Gilley, K. M., Worrell, D. L., & El-Jelly, A. 2000. Corporate environmental initiatives and anticipated firm performance: The differential effects of process-driven versus product-driven greening initiatives. Journal of Management, 26 (6): 1199–1216.Google Scholar
González-Benito, J., & González-Benito, O. 2005. Environmental proactivity and business performance: An empirical analysis. Omega, 33 (1): 1–15.CrossRefGoogle Scholar
Hart, S. 1995. A natural-resource-based view of the firm. Academy of Management Review, 20 (4): 986–1014.Google Scholar
Hart, S., & 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): 30–37.3.0.CO;2-Q>CrossRefGoogle Scholar
Hausman, J. A. 1978. Specification tests in econometrics. Econometrica, 46 (6): 1251–1271.Google Scholar
Hofer, C. W. 1975. Toward a contingency theory of business strategy. Academy of Management Journal, 18 (4): 784–810.CrossRefGoogle Scholar
Hoffman, A. J. 1997. Heresy to dogma. San Francisco: New Lexington Press.Google Scholar
Huang, P., Zhang, X., & Deng, X. 2006. Survey and analysis of public environmental awareness and performance in Ningbo, China: A case study on household electrical and electronic equipment. Journal of Cleaner Production, 14 (18): 1635–1643.Google Scholar
Jiang, R. J., & Bansal, P. 2003. Seeing the need for ISO 14001. Journal of Management Studies, 40 (4): 1047–67.Google Scholar
Kats, G. H. 2003. Green building costs and financial benefits. Boston: Technology Collaborative, p. 10. [Cited 23 October 2008.] Available from URL: http://www.mtpc.org/renewableenergy/green_buildings/GreenBuildingspaper.pdf.Google Scholar
King, A., Lenox, M., & Barnett, M. L. 2002. Strategic responses to the reputation commons problem. In Hoffman, A. & Ventresca, M. (Eds.), Organizations, policy and the natural environment: Institutional and strategic perspectives: 393–406. Stanford, CA: Stanford University Press.Google Scholar
Khanna, M., & Damon, L. 1999. EPA's voluntary 33/50 Program: Impact on toxic releases and economic performance of firms. Journal of Environmental Economics and Management, 37 (1): 1–25.Google Scholar
Konar, S., & Cohen, M. A. 2001. Does the market value environmental performance? The Review of Economics and Statistics, 83 (2): 281–289.Google Scholar
Kreps, D., & Wilson, R. 1982. Reputation and imperfect information. Journal of Economic Theory, 27 (2): 253–279.Google Scholar
Link, S., & Naveh, E. 2006. Standardization and discretion: Does the environmental standard ISO 14001 lead to performance benefits? IEEE Transactions on Engineering Management, 53 (4): 508–519.Google Scholar
Liu, Y., Feng, T., & Li, S. 2015. Stakeholder influences and organization responses: A case study of CSR suspension. Management and Organization Review, 11 (3).Google Scholar
Liu, Y., Guo, J., & Chi, N. 2015. The antecedent and performance consequences of proactive environmental strategy: A meta-analytic review of national contingency. Management and Organization Review, 11 (3).Google Scholar
Market Strategies International. 2010. Oil industry reputation hit by Gulf oil spill, survey shows. [Cited 23 October 2008.] Available from URL: http://www.marketoracle.co.uk/Article20709.html.Google Scholar
Melnyk, S., Sroufe, R., & Calantone, R. 2003. Assessing the impact of environmental management systems on corporate and environmental performance. Journal of Operations Management, 21 (3): 329–351.Google Scholar
Montabon, F., Sroufe, R., & Narasimhan, R. 2007. An examination of corporate reporting, environmental management practices and firm performance. Journal of Operation Management, 25 (5): 998–1014.Google Scholar
Nehrt, C. 1996. Timing and intensity effects of environmental investments. Strategic Management Journal, 17 (7): 535–547.3.0.CO;2-9>CrossRefGoogle Scholar
Nelson, P. 1970. Information and consumer behavior. Journal of Political Economy, 78 (2): 311–329.Google Scholar
Nga, J. K. H. 2009. The influence of ISO 14000 on firm performance. Social Responsibility Journal, 5 (3): 408–422.Google Scholar
Parsons, T. 1956. Suggestions for a sociological approach to the theory of organizations. Administrative Science Quarterly, 1 (1): 63–85.Google Scholar
Piotroski, J. D., & Wong, T. J. 2011. Institutions and information environment of Chinese listed firms. Working paper.Google Scholar
Porter, M., & van der Linde, C. 1995. Toward a new conception of the environment-competitiveness relationship. Journal of Economic Perspective, 9 (4): 97–118.Google Scholar
Rivera, J. 2002. Assessing a voluntary environmental initiative in the developing world: The Costa Rican certification of sustainable tourism. Policy Sciences, 35 (4): 333–360.Google Scholar
Sharma, S., & Starik, M. (Eds.) 2002. Research in corporate sustainability: The evolving theory and practice of organizations in the natural environment. Northampton: Edward Elgar Academic Publishing.Google Scholar
Shen, J.-Y., & Qin, X.-D. 2011. What determines Chinese firms’ decision on implementing voluntary environmental schemes? Journal of Service Science and Management, 4 (3): 380–390.Google Scholar
Shen, J., & Saijo, T. 2009. Does energy efficiency label alter consumers’ purchase decision? A latent class approach on Shanghai data. Journal of Environmental Management, 90 (11): 3561–3573.CrossRefGoogle Scholar
Smith, K. G., Guthrie, J. P., & Chen, M.-J. 1989. Strategy, size and performance. Organization Studies, 10 (1): 63–81.Google Scholar
Shrivastava, P., & Hart, S. 1992. Greening organizations. Academy of Management Best Paper Proceedings, 52 (1): 185–189.Google Scholar
Stalley, P. 2010. Foreign firms, investment, and environmental regulation in the People's Republic of China. Stanford, CA: Stanford University Press.Google Scholar
Stigler, G. 1961. The economics of information. Journal of Political Economy, 69 (3): 213–225.CrossRefGoogle Scholar
Suchman, M. C. (1995). Managing legitimacy: Strategic and institutional approaches. Academy of Management Review, 20 (3): 571–610.CrossRefGoogle Scholar
Sun, J., Wang, F., Wang, F., & Yin, H. 2015. Community institutions and initial diffusion of corporate social responsibility practices in China's banking industry. Management and Organization Review, in press.Google Scholar
United States Environmental Protection Agency (USEPA). 1998. Environmental Labeling Issues, Policies, and Practices Worldwide. [Cited 23 October 2008.] Available from URL: http://www.epa.gov/epp/pubs/wwlabel3.pdf, April 2013.Google Scholar
Wahba, H. 2007. Does the market value corporate environmental responsibility? An empirical examination. Corporate Social Responsibility and Environmental Management, 15 (2): 89–99.Google Scholar
Walley, N., & Whitehead, B. 1994. It's not easy being green. Harvard Business Review, 72 (3): 46–52.Google Scholar
Wang, J., Guthrie, D., & Xiao, Z. 2012. The rise of SASAC: Asset management, ownership concentration, and firm performance in China's capital markets. Management and Organization Review, 8 (2): 253–281.CrossRefGoogle Scholar
Watson, K., Klingenberg, B., Polito, T., & Geurts, T. 2004. Impact of environmental management system implementation on financial performance. Management of Environmental Quality, 15 (6): 622–628.Google Scholar
Wu, X. 2010. Speech for 15th anniversary of environmental labeling program and green economy forum. Published on August 23 at www.sepacec.com.Google Scholar
Yue, L. Q., & Ingram, P. 2012. Industry self-regulation as a solution of reputation commons: A case of the commercial bank clearinghouse. In Barnett, M. & Pollock, T. (Eds.), The Oxford handbook of corporate reputation: 279–296, Oxford: Oxford University Press.Google Scholar
Zhao, J., & Xia, Q. 1999. China's environmental labeling program. Environmental Impact Assessment Review, 19 (5): 477–497.Google Scholar
Supplementary material: File

Wang supplementary material

Translated abstracts

Download Wang supplementary material(File)
File 15.1 KB