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Research paper

   Drivers for the participation of small and
  medium-sized suppliers in green supply chain
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Drivers in green supply chain initiatives                         Supply Chain Management: An International Journal
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Drivers in green supply chain initiatives                            Supply Chain Management: An International Journal
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Table I Relevant literature and link to this study
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Table I
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Table I
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Drivers in green supply chain initiatives                          Supply Chain Management: An International Journal
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Drivers in green supply chain initiatives                                  Supply Chain Management: An International Journ...
Drivers in green supply chain initiatives                             Supply Chain Management: An International Journal
  ...
Drivers in green supply chain initiatives                                Supply Chain Management: An International Journal...
Drivers in green supply chain initiatives                           Supply Chain Management: An International Journal
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Drivers in green supply chain initiatives                          Supply Chain Management: An International Journal
     ...
Drivers for the participation of small and medium-sized ...
Drivers for the participation of small and medium-sized ...
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  1. 1. Research paper Drivers for the participation of small and medium-sized suppliers in green supply chain initiatives Su-Yol Lee nBiz Convergence Team, College of Business Administration, Chonnam National University, Gwangju, South Korea Abstract Purpose – This paper aims to describe what facilitates small and medium-sized suppliers in participating in green supply chain initiatives. These initiatives are inter-organizational initiatives attempting to improve environmental performance throughout the entire supply chain. This paper seeks to examine buyer green supply chain management practices, government involvement, and internal readiness of the suppliers themselves, as possible drivers. Design/methodology/approach – The research framework and hypotheses were examined by using a mail survey conducted in South Korea in 2005. The empirical analysis used data from 142 small and medium-sized suppliers. Validity and reliability of the scales for the construct of interest were assessed through a factor analysis and Cronbach-alpha test. To test the hypotheses for the drivers of suppliers’ willingness to participate in green supply chain initiatives, hierarchical linear regression was adopted. Findings – The study finds that buyer environmental requirements and support were positively linked to their suppliers’ willingness to participate in green supply chain initiatives. The government can play an important role in motivating these suppliers. Finally, the paper reveals that the more slack resources and organizational capabilities suppliers had, the more willingly they were to participate in those initiatives. Originality/value – This research is one of the few studies which explore the drivers of participation in green supply chain initiatives by considering small and medium-sized suppliers and their most important stakeholders, including buyers and the government. Keywords Environmental management, Supply chain management, Small to medium-sized enterprises, Suppliers, Korea Paper type Research paper 1. Introduction in the Korean automobile industry are SMEs (Choi, 2003). Therefore, the involvement of SME suppliers is vitally External pressures, such as European regulations on take- important in achieving national or corporate environmental back and on the use of certain hazardous substances, have targets (Holt et al., 2001). been driving firms and governments to turn towards including Over the past decade, the green supply chain (GSC) has small and medium-sized enterprises (SMEs) in the emerged as an important component of the environmental environmental improvement process of entire supply chains and supply chain strategies of a number of companies. The for mainly two reasons. First, disruption risks engendered by GSC encompasses a broad range of practices from green environmental issues can pass on through suppliers. For purchasing to integrated supply chains flowing from suppliers, instance, in 2001, Sony had to bear extensive costs for replacing parts, storing, and repackaging the nearly 1.3 to manufacturers, to customers, and to the reverse supply million of its best-selling PlayStation, These PlayStations were chain, which is “closing the loop” (Zhu and Sarkis, 2006; Rao stopped at the Dutch border because unsafe levels of and Holt, 2005). Seen from a life-cycle perspective, initiatives cadmium were detected in the cables of the consoles striving to achieve the goal of the GSC, a notable (Business Week, 2005). The problem-causing cables were environmental and economic gain of the entire supply, are manufactured by Sony’s suppliers. Second, a supply chain hard to implement successfully without the deep involvement base as well as a country’s industrial base might primarily of the supply chain partners. In other words, it is crucial to consist of SMEs. For example, 93.5 percent of the suppliers include SME suppliers in the supply chain-wide environmental improvement process. The current issue and full text archive of this journal is available at The author, however, has seen very little research on the www.emeraldinsight.com/1359-8546.htm issue of what motivates suppliers to take part in those green supply chain initiatives. A growing number of green supply chain management (GSCM) studies have dealt with the Supply Chain Management: An International Journal 13/3 (2008) 185– 198 q Emerald Group Publishing Limited [ISSN 1359-8546] The author would like to thank the Business Institute for Sustainable [DOI 10.1108/13598540810871235] Development in Korea for assisting with the data collection. 185
  2. 2. Drivers in green supply chain initiatives Supply Chain Management: An International Journal Su-Yol Lee Volume 13 · Number 3 · 2008 · 185 –198 drivers for GSCM, its practices, and the relationships Klassen, 2006). Although these terms are used often with between GSCM and its operational and/or economic subtle differences and within different contexts, they can be performance (e.g., Vachon and Klassen, 2006; Zhu and understood as a buying firm’s intention to and activities that Sarkis, 2006; Lamming and Hampson, 1996). However, these integrate environmental issues into supply chain management scholarly works have primarily focused on large-sized buying in order to improve the environmental performance of firms; so they scarcely took into account the drivers to suppliers and customers (Handfield et al., 2005; Bowen facilitate involvement of suppliers in green supply chain et al., 2001). The third party-led GSC initiative is the programs that were likely to be initiated by the government environmental program that facilitates environmental and large buying firms. Likewise, some scholars addressed improvement of suppliers within the supply chain designed environmental management in SMEs. For instance, Clark by governments, non-for-profit organizations, and trade (2000) pointed out the difficulty of SMEs in improving their associations. In particular, government-led environmental environmental performance. Hitchens et al. (2003) revealed programs are becoming popular in some countries. The what factors lead to the adoption of advanced environmental British government’s Energy-Efficiency Best Practice management of SMEs. However, they paid less attention to campaign, the United States Environmental Protection the SMEs who were suppliers within the supply chains. As a Agency’s (US EPA) Environmental Technology Best result, SME suppliers can be treated as missing links between Practice program, and the Korean government’s Supply SME environmental management and green issues in supply Chain Environmental Management (SCEM) initiative are chain management. The author can say that this study explored a research topic about what influenced the good examples. Although these initiatives are initiated by involvement and/or participation of SME suppliers in green governments the core mechanism of utilizing the relationship supply chain programs led by their buyers or government. between large buying firms and their suppliers is almost Our research questions can be specified: What are the identical to the buying-firms-led GSC initiative. important influential factors for the participation of SME Holt et al. (2001) identified seven types of GSC initiatives suppliers in GSC initiatives? In particular, how do buyers and which support SMEs in improving their environmental governments affect participation? How does participation vary performance by classifying the organizations involved in according to the internal capabilities of the SME suppliers? arranging them: governments, trade associations and sector For this purpose of study, we referred to several previous bodies, partnership groups, individual companies, business studies conducted in different research areas, such as support organizations, non-for-profit green business-support environmental management, supply chain management and organizations, and green business clubs. Although Holt et al. small business management. The author integrated this used the term of environmental business-support services research for developing our research framework on the issue interchangeably for green or GSC initiatives, the meanings of of the involvement of SME suppliers in supply chain-wide the terms are exactly the same. In their classification, the environmental improvement programs. company-driven initiative is equivalent to the buying firm-led This paper is organized as follows. In the next section, GSC initiative and other organizations-driven initiatives are based on a synthesis of existing literature on green supply equivalent to the third party-led GSC initiative in this paper. chain management, environmental management, and small Why are the governments as well as buying firms, in business management, the author describes this research particular large-sized companies paying more attention to framework and resulting hypotheses. Following the next SME suppliers? SME suppliers usually lack the information, section, the research method, the author presents results of resources, or expertise to deal with environmental issues. the empirical analyses and a discussion. In the final section, They have little know-how in bringing into effect the technical the author highlights implications from the results and and managerial changes that would enable them to meet limitations of this study along with directions for future emerging environmental and social standards (Luken and research. Stares, 2005). Worse, they often hesitate to reach out for help without some external stimulus. As a result, SME suppliers 2. Literature review can be a source of environmental risk and a bottleneck in pursuing the goal of a greener supply chain. In this situation, 2.1. A GSC initiative and SME suppliers GSC initiatives are thought to be one of the key mechanisms A GSC initiative can be defined as the programs striving to used to diffuse more advanced environmental management to transfer and disseminate environmental management, in less environmental capable SME suppliers (Lamming and particular advanced environmental management practices, through the entire supply chain, by using the relationships Hampson, 1996). These initiatives are inter-organizational between large-sized buying firms and their suppliers. The projects between the key-players in the supply chain: the GSC initiative includes all the programs driven by buying large-sized lead companies and their upstream and firms and/or third parties, particularly the government, with downstream suppliers. Many people have perceived that a the purpose of improving the environmental performance of GSC initiative promotes efficiency and synergy among suppliers through the buying firms’ influences. business partners as well as their lead company (Rao and When considering the buying firm-led GSC initiative, Holt, 2005); however, a GSC initiative cannot improve one which is considered the intersection of environmental issues player’s efficiency and performance individually because the with supply chain management, several terms are commonly environmental performance of the supply chain can be used such as green supply (Bowen et al., 2001), GSC (Sarkis, achieved only through the interaction of various activities 2003), GSCM (Zhu and Sarkis, 2004), environmental supply undertaken by each player. That is why the involvement and chain management (Zsidisin and Siferd, 2001; Handfield participation of SME suppliers is important in GSC et al., 2005), and green supply chain practices (Vachon and initiatives. 186
  3. 3. Drivers in green supply chain initiatives Supply Chain Management: An International Journal Su-Yol Lee Volume 13 · Number 3 · 2008 · 185 –198 2.2. The drivers for SME suppliers in GSC initiatives so their results missed the role of buying firms for involving There are mainly two streams of research that are related to SME suppliers in green supply chain initiatives. Moreover, to our work: GSCM and environmental management in SMEs. date, there have been no studies that proposed directly the In what follows, the author provides an overview of the two influencing factors of SME supplier participation in GSC research streams; however, the author note that the objective initiatives as well as have tested them. here is to position this work relative to the existing literature, rather than providing an exhaustive review. Table I illustrates 2.3. GSC initiatives in South Korea what the existing studies focus on, what their findings are, and Social concern about the environment in Korea just began to how these studies are referred to in this study. emerge in the early 1990s. Before then, there was a high Studies on GSCM address the definition, practices, drivers, priority on economic growth. This high priority enabled the and consequence of GSCM. The practices relating to GSCM Korean economy to grow more than 500-fold for the three encompass the monitoring-based approach. This approach decades (Lee and Rhee, 2006). However, significant involves the activities of gathering and processing supplier environmental accidents and controversial events such as the information, setting supplier assessment criteria, and phenol leakage in 1991 have driven Korean society to turn its evaluating the environmental performance of incoming attention to the environment. Moreover, external pressures goods and the suppliers that provide them. GSCM also resulting from regulations in the European Union, such as the encompasses the collaboration-based approach. This RoHS and WEEE Directives[1], have led the Korean approach includes training and education programs given to government, as well as companies, to consider the suppliers, environmental managerial information sharing, and environmental impact engendered by the entire supply collaborative research with suppliers (e.g., Vachon and chain. The Korean economy heavily depends on overseas Klassen, 2006; Min and Galle, 2001; Bowen et al., 2001; markets. Korean companies increasingly rely on their Lippman, 1999). Those practices are known to begin mainly suppliers for gaining and sustaining competitiveness. For with external stakeholder pressures, in particular customer instance, more than 65 percent of the total cars made in demands and regulations (Hall, 2000; Preuss, 2005). These Korea were exported[2]. The average purchase expenditure as practices are enabled by intra- and/or inter-organizational a percent of sales dollars of Korean companies is up to 59 factors such as top management commitment and percent[3]. The case of Sony’s PlayStation has also served as a organizational capabilities including supply chain reminder to the Korean government and industries of what management capabilities, cross-functional teams, and closer may go wrong in national and industrial competitiveness if the cooperation with suppliers (e.g., Bowen et al., 2001; Theyel, supply chain is ignored. 2001; Lippman, 1999). Furthermore, recent studies As a result, the Korean government established a new increasingly try to probe the relationship between the policy on expanding environmental management throughout GSCM practice and its performance in terms of the entire supply chain, in particular the SME suppliers. A environmental and financial performance (Rao and Holt, national GSC initiative was started in 2003 based on this 2005; Zhu and Sarkis, 2004). The focus in most of those policy. This national program was originally programmed and works is on the perspective of the buying firms and not on the supported, based on the benchmark of the Supplier suppliers. Therefore, to my knowledge, no research has Partnership for the Environment in North America, by the directly addressed the drivers for SME supplier participation Korean government to encourage SME suppliers to improve in GSCM initiatives that are initiated and/or managed by their environmental performance utilizing relationships large-sized buying firms. between the key-players of large-sized buying firms and In the SMEs’ environmental management stream, there are their suppliers. It is called the “supply chain environmental some studies where the unique characteristics of SMEs in management (SCEM) program” because supply chain adopting and implementing environmental management, management is adopted as a core tool to disseminate and such as less awareness about environmental issues, less transfer environmental management know-how of the large environmental pressures from stakeholders, and lack of buying firms to the SME suppliers. human, technological, and financial resources required for Under this program, the in-depth environmental supportive advanced environmental management, have been considered programs and activities are given to the suppliers who (e.g., Clark, 2000; Hall, 2000). A few studies on participate in this national project with their purchasing environmental support programs, which were mainly case companies. The environmental supports encompass the studies, mentioned the importance of supply chain pressures transfer of the skills of hazardous material analysis, mass and support of partners such as in the form of industry balance management, product, and process environmental leaders and experts given to SMEs as drivers and facilitators data profiling, and the managerial support of the green in improving their environmental performance (Luken and procurement implementation and the environmental Stares, 2005; Friedman and Miles, 2002; Holt et al., 2001). A management system (EMS) buildup. All the supports are more comprehensive work performed by Hitchens et al. provided through cooperation of key buying companies with (2003) focused on the major influential factors on adoption of external expertise groups. This project has been implemented clean technology in SMEs. Those existing studies on SMEs’ with funds from the national budget and matching funds from environmental management mentioned partially the participating companies. influential factors, such as regulations, external stakeholder pressures, support from external stakeholders, and internal 3. A conceptual model and hypotheses organizational capabilities, to improve environmental capabilities and/or performance in SMEs; however, in Based on the existing studies into the streams of green supply general those scholarly and practical works barely chain management and SMEs’ environmental management, considered a circumstance of the supply chain specifically, the author can articulate influencing factors for SME supplier 187
  4. 4. Table I Relevant literature and link to this study Research Researcher Major emphasis Major finding methodology Implication to supplier GSC participation (a) Green supply chain management (GSCM) Bakker and A framework for assessing organizational capabilities The capability assessment framework: interpretation Theory building/ Referred to the notion about the importance of the Nijhof (2002) for responsible chain management of internal and external claims, integration into case study management in building capabilities for the business processes, monitoring them, and development of the third hypothesis and measurement communication with stakeholders/the role of (GSC readiness of a supplier) management for building the capabilities Bowen et al. The relationship between supply management Internal drivers for green supply implementation of a Empirical study Referred to the green supply for understanding and Su-Yol Lee (2001) capabilities and green supply practices firm: strategic purchasing and supply, corporate defining GSC initiatives (in particular, driven by buying environmental proactivity, and supply management firms) and for developing survey measurement (a capabilities buyer’s GSCM practices) BSR (2001) Suppliers’ perspectives and insights for effective Positive business impacts of environmental initiatives Interview/case Referred to the recommended effective strategies for strategies for supply chain environmental driven by customers (e.g., cost reductions and greater study developing the second hypothesis (a buyer’s GSCM Drivers in green supply chain initiatives management (SCEM) operational efficiency, effective strategies for SCEM practices) (e.g., environmental incentives, a premium for environmental products, clear and timely communication, and more collaboration with suppliers Cousins et al. Classification of environmental-related supplier Four generic categories of environment-related Conceptual Referred to the environmental-related supplier actions (2004) initiatives in considering risks supplier initiatives: No choice, Go first, why bother, framework/theory for understanding the defining GSC initiatives (in 188 and Enthusiasts building particular, driven by buying firms) and developing survey measurement (a buyer’s GSCM practices) US EPA (2000) A practical guide development for a lean and green A guidebook synthesizing the best practices of leading Case study Referred to the suggested guides for understanding supply chain US companies for saving costs and reducing GSC initiatives (in particular, driven by buying firms) environmental impacts simultaneously Geffen and The role of suppliers in improving environmental Elements of the successful application of Case study Referred to the research results for understanding the Rothenberg performance of manufacturing operations environmental innovation: strong partnership[s with importance of suppliers’ role in improving the entire (2000) suppliers and appropriate incentive systems supply environmental performance Hall (2000) The circumstances under which environmental supply Environmental innovations diffuse from a customer Case study Referred to the role of a channel leader with sufficient chain dynamics emerge firm to a supplier firm if there is a channel leader with channel power in diffusing environmental innovations sufficient channel power over its suppliers within the supply chain for the development of the first hypothesis (a buying firm’s GSCM practices) Handfield et al. Integration of environmental management and supply Environmental supply chain management strategy Theory building/ Referred to an address that top management support (2005) chain strategies development processes: define strategic importance, case study is a fundamental driver for GSCM for developing the conduct research, develop objectives, implement third hypothesis (managers’ awareness as one of strategy and monitor progress GSCM readiness characteristics) Krut and Current trends in supply chain environmental Trends in SCEM (towards integrating supply chain Case study Referred to the definition of SCEM and its trends for Karasin (1999) management (SCEM) in the electronics industry management and environmental issues, stronger understanding and defining GSC initiatives Volume 13 · Number 3 · 2008 · 185 –198 external and internal driving forces for SCEM, and industry’s response to SCEM forces) Supply Chain Management: An International Journal (continued)
  5. 5. Table I Research Researcher Major emphasis Major finding methodology Implication to supplier GSC participation Lippman Elements for successful supply chain environmental Characteristics of effective SCEM: top-level leadership, Case study Referred to the clarified elements for the successful (1999) management (SCEM) cross-functional team, communication within SCEM for developing the third hypothesis and survey companies and suppliers, and working with suppliers measurement (GSC readiness of a supplier) Lippman Current trends in supply chain environmental Effective strategies for successful SCEM recommended Case study Referred to the notion that green incentives, (2001) management (SCEM) and effective strategies for by suppliers: integration environmental performance communication and collaboration are the effective SCEM from a supplier perspective into purchasing decision, incentives encouraging strategies for SCEM for developing the first hypothesis supplier involvement, effective communication and (a buying firm’s GSCM practices) collaborative approaches with suppliers Preuss (2005) Environmental management practices in the supply Three approaches for greener supply chain Theory building/ Referred to address that regulatory pressures Su-Yol Lee chain management area of a firm management: managing greener materials case study transmitted to suppliers through customers’ green transformation, managing greener formation and requirements (a second-hand regulation) for managing greener relationships developing the second hypothesis; adopted the clarified three approaches for developing survey Drivers in green supply chain initiatives measurement (a buyer’s GSCM practices) Rao and Holt The link between GSCM and corporate performance Greening inbound, production and outbound leading Empirical study Referred to clarified GSCM practices for developing (2005) corporate competitiveness and economic performance survey measurement (a buyer’s GSCM practices) Sarkis (2003) A decision framework for evaluating and selecting Development of a dynamic non-linear multi-attribute Literature review/ Referred to the green supply chain management green supply chain practices decision model for evaluating green supply chain model practices for understanding and defining GSC alternatives and supporting the decision making development initiatives (in particular, driven by buying firms) within the green supply chain 189 Simpson and The relationship between suppliers’ environmental Positive influence of customer firms’ involvement in Case study/theory Referred to the proposition about the impact of a Power (2005) management activity and the structure of customer- improvements to suppliers’ lean performance and building customer firm’s involvement on the environmental supplier relationship close relationship between them for the environmental management of its suppliers for developing the second practices of the suppliers hypothesis (a buyer’s GSCM practices) Theyel (2001) The impact of supplier relations on environmental Environmental relations between customers and Empirical study Adopted the clarified three types of environmental performance suppliers leading environmental performance, such as relations between customers and suppliers for waste reduction developing survey measurement (a buyer’s GSCM practices) Vachon and Determinants of green supply chain practices (GSCP) Positive relationships between technological Empirical study Referred to clarified GSCP for understanding GSC Klassen (2006) integration with primary suppliers (and Major initiatives and developing survey measurement (a customers) and green supply chain practices and the buyer’s GSCP practices) supply base reduction and environmental collaboration with suppliers Wycherley Facilitators and barriers of greening supply chains Clarification of general facilitators (e.g., active Case study Referred to the mentions about facilitators and (1999) engagement of a buyer, trust in long-lasting barriers for developing hypotheses (e.g., a buyer’s relationships, more awareness in environmental issues engagement for the first hypothesis, government of suppliers, and committed individuals in suppliers) policies for the second hypothesis, and more Volume 13 · Number 3 · 2008 · 185 –198 and barriers (e.g., increased costs, mistrusted environmental awareness of suppliers and committed suppliers, lack of information, resources and expertise individuals for the third hypothesis) of suppliers, and lack of government policies) in Supply Chain Management: An International Journal greening supply chains (continued)
  6. 6. Table I Research Researcher Major emphasis Major finding methodology Implication to supplier GSC participation Zhu and Sarkis The relationship between GSCM and environmental A buying firm’s GSCM practices influencing its Empirical study Referred the clarified GSCM practices for developing (2004) performance operational and environmental performance survey measurement (a buyer’s GSCM practices) Zhu and Sarkis Differences in drivers and practices of green supply Regulation and globalization as main causes for the Empirical study Referred the clarified GSCM practices for developing (2006) chain among industries differences in drivers and practices of GSCM among survey measurement (a buyer’s GSCM practices) industries in China Zsidisin and A framework for theory development of environmental Suggestion of the definitions of the environmental Literature review/ Referred to the clarification and definition of ESCM Siferd (2001) purchasing supply chain management (ESCM) and environmental theory building and environmental purchasing for understanding and Su-Yol Lee purchasing defining GSC initiatives (in particular, driven by buying firms) (b) Environmental management in SMEs Friedman and The effect of regional environmental support programs External supports as an enabler for achieving Empirical study Referred to the BBB program for understanding GSC Miles (2002) (UK’s The Better Business Pack; BBB) in improving environmental and financial benefits in SMEs; but (descriptive initiatives (in particular, driven by third parties) and the Drivers in green supply chain initiatives environmental performance of SMEs appropriate supports differ depending on the analysis) notion about the effect of the programs for developing situations and firm characteristics the second hypothesis (government involvement) Hitchens et al. Influential factors for the take up of clean technologies Three key influential factors for adopting advanced In-depth Referred to the findings for understanding the (2003) in SMEs environmental management in SMEs: firm interviews/ importance of external support programs for SMEs, competitiveness, culture, and use and availability of empirical study such as GSC initiatives, and developing the third information and advice hypothesis (GSC readiness of a supplier) Holt et al. Effectiveness of environmental business-support Clarification of diverse SME support programs, clear, Case study Referred to the classification of environmental support 190 (2001) services for improving the environmental performance consistent and easily accessible guidance from services for understanding and defining GSC of SMEs external organization for more effective environmental initiatives; referred to the recommendation for support services developing the first and second hypotheses (a buyer’s GSCM practices and government involvement) Jung and Lee Trends on implementing an environmental Antecedents of implementing and EMS in SMEs (firm Empirical study Referred to the antecedents of EMS implementation (2004) management system (EMS) in the Korean SMEs size and the extent of pressures from foreign markets (descriptive and the strategies for developing the first hypothesis and customer) and strategies for effective EMS analysis) (a buyer’s GSCM practices) and the third hypothesis implementation and maintenance (managers’ (GSC readiness of a supplier), respectively environmental awareness, training and education, and cross-functional environmental communication) Luken and Practical methods for SMEs to meet corporate social Supply chain pressures (in particular, well targeted and Case study Referred to the research finding for developing the Stares (2005) responsibility (CSR) requirements enterprise-specific CSR requirements) as an first hypothesis (a buyer’s GSCM practices) opportunities to improve environmental and social performance of SMEs Noci and Antecedents of environmental research and Regulations and social concern for the environment as Case study Referred to the results for developing the first and Verganti development (R&D) and product innovation in SMEs direct drivers and customers’ requirements as indirect second hypotheses about the role of buying forms and (1999) drivers for the environmental innovation in SMEs government in GSC initiative participation of SMEs, Volume 13 · Number 3 · 2008 · 185 –198 respectively Schaper (2002) The determinants of the environmentally responsible Positive relationships between the level of Empirical study Referred to the results for developing the third Supply Chain Management: An International Journal business behavior in SMEs environmental information an time resources of hypothesis (GSC readiness of a supplier) managers and SMEs’ environmental performance
  7. 7. Drivers in green supply chain initiatives Supply Chain Management: An International Journal Su-Yol Lee Volume 13 · Number 3 · 2008 · 185 –198 participation in GSC initiatives with three categories: buyer, 3.2. Government involvement third-party (specifically, the government), and the SME The role of the government in GSC has been getting supplier, itself. Although the author acknowledges that these increasing attention over the past decade. As global and other variables may account for variation in the environmental regulations shift emphasis from pollution participation of SME suppliers in GSC initiatives, the controls at manufacturing plants to the life cycle of the author limited this model to the following factors that were products, more governments are becoming involved in GSC thought to be more relevant to this issue. initiatives. For instance, the British government has undertaken the energy-efficiency best practice campaign, “Making a Corporate Commitment,” which provides free 3.1. Buyer influence advice and technical support to SMEs through the The catalyst for widespread recognition of environmental Environmental Technology Best Practice Programme (Holt responsibility by SME suppliers is thought to come from et al., 2001). The US EPA utilizes a more indirect way in supply chain pressure or regulations (Friedman and Miles, comparison with the UK cases. The EPA focuses on 2002). Smaller firms are relatively less exposed to the scrutiny developing the best practices of GSC and bringing of regulatory enforcement on environmental issues than large awareness of those practices through guidebooks and companies are; however, external environmental pressures are manuals (e.g., US EPA, 2000). In Korea, a similar increasingly transmitted to SME suppliers by their customers government-driven initiative started in 2003. This national along the supply chain (Noci and Vergandi, 1999). In project was designed to encourage SME suppliers to develop addition, more lead companies in supply chains increasingly their own environmental management system by utilizing the invest much time and energy in developing the environmental relationship between large-sized buying firms and their capability of their suppliers because they have come to realize suppliers (Lee and Jang, 2003). Government involvement in these initiatives includes a their environmental goals cannot be accomplished by their range of scope from direct technical and financial support to environmental capability alone. The buyer GSC practices indirect encouragement with tax-cut incentives and to striving to improve the environmental performance of infrastructure development for environmentally friendly suppliers encompass green procurement activities, such as industrial complexes. The question still exists whether the setting supplier assessment criteria and evaluating the government-driven initiatives are assisting the vast majority of environmental performance of incoming goods and the SMEs to move towards greener enterprises (Friedman and suppliers, as well as support activities, such as providing Miles, 2002; Holt et al., 2001). The government, however, is training and education programs to their suppliers, sharing seen to play a more important role in driving SME suppliers information, and undertaking collaborative research and to be interested in GSC initiatives. Noci and Vergandi (1999) development (Vachon and Klassen, 2006). claim that governmental support and regulations are a more Without a doubt, buyers, particularly end-user product important trigger for environmental innovations in SMEs. manufacturers in supply chains, are the most important and Accordingly, the above arguments lead to the following influential stakeholders for the suppliers. Therefore, changes hypothesis: in procurement policies and practices of a buyer, which in H2. Government involvement in GSC initiatives has a turn appear as environmental requests, can directly affect the positive influence on the willingness of SME suppliers behavior of its suppliers by serving as an instigator in making to participate in GSC initiatives. them turn their attention to environmental issues. Hall (2000) predicted that a wave encouraging the greening of a supply chain is likely to be triggered by some powerful final buyers 3.3. GSC readiness who reflect market pressures onto their suppliers. It is a well- Cooperating with business partners in GSC initiatives is not known fact that the dominance of a powerful buyer has an easy task. It requires many changes for SME suppliers; important implications for changes in the entire supply chain. therefore, the attitude towards these green initiatives may vary depending on their internal characteristics. Although SME In addition, the suppliers who have experience receiving suppliers, in general, tend to be negligent in dealing with technical and managerial assistance from their buyers when environmental issues and suffer from a lack of know-how and improving their environmental performance are likely to resources (Luken and Stares, 2005; Schaper, 2002), participate in cooperative environmental initiatives with their differences still exist among them. business partners. Actually, suppliers can feel positive about Sharma et al. (1999) mentioned that the range of the making the requested changes because they can likely expect environmental strategy might differ depending on the cost reductions, greater operational efficiencies, and enhanced availability of resources of the firms and the managerial value to customers by participating in GSC initiatives with interpretation of environmental issues. Likewise, the their buyers. For example, General Motors Company willingness to participate in those GSC initiatives is provided their suppliers environmental training and expected to be influenced by the internal characteristics of education in North America in the late 1990s, which, in the SME suppliers. These internal characteristics are referred turn, contributed to the energy-efficiency improvement of its to as GSC readiness in this paper. This GSC readiness can be suppliers, which then made them strong supporters of GM’s measured by a range of diverse indicators, including manager GSCM program (Lippman, 1999, 2001). All of these environmental awareness, cross-functional environmental arguments lead to the first hypothesis: communication, and human, technical, and financial slack H1. Buyer GSC practices have a positive influence on the resources. First, managers are heavily responsible for willingness of SME suppliers to participate in GSC identifying external challenges and deploying internal initiatives. resources to respond to them (Amit and Schoemaker, 191
  8. 8. Drivers in green supply chain initiatives Supply Chain Management: An International Journal Su-Yol Lee Volume 13 · Number 3 · 2008 · 185 –198 1993). Environmental strategies and the response of a firm Directory[4]. The author chose SME suppliers who were are likely to differ, at least in part, with the managers’ aware of at least what programs of the Korean government evaluation of external stakeholder requirements, and then exist and what programs were available. Restricting the subsequent translation of their interpretation into specific sample to this limited number of SME suppliers in Korea may environmental practices, such as GSC initiatives (Bakker and have limited the generalizability of the findings. The model Nijhof, 2002; Sharma et al., 1999; Lippman, 1999; Jung and and findings should not be generalized without due Lee, 2004). Second, there is an argument that a firm’s consideration of possible limitations. However, a restricted organizational capabilities facilitate the adoption of proactive sample can add more power to the findings, because it has environmental management practices. For instance, existing been said to be more difficult to uncover findings in a sample cross-functional teams and borderless communication among in which the variance in the independent variables has been departments based on total quality management principles restricted than with a large variance (Bansal, 2005). lead to pollution-preventive approaches in dealing with The data were then collected through questionnaires mailed environmental issues (Hart, 1995), GSCM (Lippman, to top-level executives (see the Appendix). The respondents 1999), and EMSs(Jung and Lee, 2004). Third, a series of were mainly top managers; however, some respondents were changes, including taking part in GSC initiatives, may require top-level managers of sales, production, or planning human, technical, and financial resources to deploy even departments who were well acquainted with buyer though a large of portion of the needed resources can be requirements, government support, corporate strategies, and compensated for by buyers or by government support. In environmental management of their firms. To encourage actuality, the difference in the environmental strategies and responses, an initial mailing of surveys was followed one week environmental innovation of the firms is strongly influenced later by reminder phone-calls to the contact persons at the by financial slack resource, technical capabilities, and human companies that did not answer the survey. Data collection was resources (e.g. Ramus and Steger, 2000; Sharma et al., 1999). completed in May 2005. A total of 142 surveys were returned, Each factor mentioned above may play an important role in representing a response rate of 13.4 percent. In general, choosing and developing environmental strategies and response rates greater than 20 percent are recommended in practices. However, we consider those factors as one supply chain management research (e.g., Prahinski and variable, GSC readiness, because the author expects that Benton, 2004; Pagell et al., 2004). However, this sample the variation in each factor among SME suppliers is not size met the level of 100 and above that Hair et al. (1992) significant. All of these arguments lead to the following recommended for providing valid results. Because of the hypothesis: receipts of 13 incomplete responses, only 129 surveys were H3. The GSC readiness of SME suppliers has a positive used in our hierarchical regression analysis. Table II provides influence on the willingness of SME suppliers to a summary of the respondents. participate in GSC initiatives. Non-response bias was tested by comparing the responses From all of this reasoning and the subsequent hypotheses, the that were returned early with those returned late. The author can suggest a research framework of a study on the responses were split into two groups based on if the surveys determinants of the participation of SME suppliers in GSC were returned before or after the reminder phone-call. Seven initiatives. As seen in Figure 1, the willingness of participation items were randomly selected from the survey and t-tests were mainly relies on three influential factors: buyer GSC performed on the responses of the two groups (n1 ¼ 53, practices, government involvement, and the readiness of the n2 ¼ 76). The t-tests yielded no statistically significant SME suppliers, themselves. differences among the seven survey items tested. 4.2. Research variables and measurements 4. Research methodology A survey instrument to measure the constructs of interest 4.1. Sample selection heavily relied on the previously tested and validated Consistent with the purpose of this study, small and medium- instruments wherever possible. First, four items used to sized manufacturing suppliers were sampled. A Korean measure buyer GSC practices were chosen and modified from sample of 855 SME suppliers, with more than 20 employees the questionnaires used in existing studies, such as Vachon and less than 500, was complied from an exclusive source, the and Klassen (2006) and Zhu and Sarkis (2004). Second, we Small and Medium Sized Enterprise Support Program developed five items to measure government involvement Figure 1 Drivers for the willingness of SME suppliers to participate in GSC initiatives 192
  9. 9. Drivers in green supply chain initiatives Supply Chain Management: An International Journal Su-Yol Lee Volume 13 · Number 3 · 2008 · 185 –198 Table II Summary of responses Industry Machinery Metal Electric and electronic Chemical and textile Others Total Sample size 154 202 225 134 140 855 Respondents 21 29 32 22 25 129 Response rate (%) 13.6 14.4 14.2 16.4 17.9 15.1 Sales (US$ million) 26.0 21.8 38.3 24.9 11.3 24.5 No. of employees 125 82 154 111 48 104 based on the literature which addressed what roles the and the reliability index approximately reaching to the government and other institutions expected to be taken in recommended level (Cronbach’s alpha ¼ 0:67), we retained improving the environmental performance of SMEs (e.g., all five items for the variable of government involvement. Friedman and Miles, 2002; Holt et al., 2001; Freel, 2000). Third, the scale for GSC readiness was compiled from a series of previous studies on the determinants of proactive 5. Results and discussion environmental strategy (e.g., Bakker and Nijhof, 2002; Bivariate correlations and descriptive statistics are presented Sharma et al., 1999; Hart, 1995). A total of six items were in Table IV. Hierarchical linear regression was used to test the extracted. Finally, for a newly developed construct, the three hypotheses, which were the relationships between willingness to participation in GSC initiatives (referred to buyers’ GSC practices, the government’s involvement, the GSC participation), four items, including level of GSC readiness of SME suppliers, and the participation understanding and awareness of GSC initiatives, intention willingness of SME suppliers to GSC initiatives. to participate and expectation of benefits, were employed. All According to the results in Table V, two of the three items were assessed using a five-point Likert scale. hypotheses were strongly supported. Evidence of a positive To control the SME supplier characteristics, we considered relationship between GSC participation and government two variables: firm size and age. Firm size has been known to involvement was relatively weak, so the second hypothesis was be an important contextual variable to tell more not supported with a usual cut-off p-value of 0.05; however, environmentally proactive companies from lesser ones (e.g., according to other studies applying a cut-off p-value of 0.1 Grant et al., 2002; Klassen, 2000). In this study, firm size was (e.g., Krause et al., 2000; Prahinski and Benton, 2004), it can measured by the number of employees (full-time equivalent) be said that overall the potential drivers suggested in this as of March 2005. The natural logarithm of this measure was paper were seen to have a positive impact on the participation used in the regression analysis. The age of a SME supplier and involvement of SME suppliers in GSC initiatives. In the was introduced as a proxy for the age of the process and regression model, the incremental variance, explained by the technology in plants in the previous research of Vachon and three variables, was statistically significant (DR2 ¼ 0:39, Klassen (2006). p , 0:01). First, the author saw strong evidence that buyers played a 4.3. The validity of the measurement model critical role in facilitating SME suppliers to take part in GSC The author used three ways to support the content validity of initiatives. For many firms, the key channel for receiving a this survey: demand for more environmental friendly products is their 1 an extensive literature review; customers. The suppliers in this case, therefore, often 2 in-depth interviews with managers at a purchasing firm responded to a second-hand regulation conveyed through and its suppliers which were participating in the Korean the supply chain, in particular from their buyers (Green et al., national GSC initiative as well as a researcher from the 2000). The result of this research was very consistent with Korea National Cleaner Production Center (KNCPC), previous arguments that the supply relationship and the direct who had designed this national project; and involvement of buyers in supplier practices lead to greener 3 a pre-test of the survey by the interviewees after designing suppliers. For example, Rao (2002) addressed that the survey. collaborative relationships between customers and their Even though the author already had an understanding of GSC suppliers as well as support from the customers can initiatives because the author was also taking part in this contribute to high levels of advanced environmental project as outside support experts where the author’s role was management practice of the suppliers. The environmental to assist the participant SME suppliers in adopting pressures and support from the buyers were seen to drive environmental management, these interviews and the pre- SME suppliers to improve their environmental capability, test provided better understandings and suggestions on and, in turn, to participate in GSC initiatives. wording and improvements in format. Second, the government’s involvement was likely to be The unidimensionality and reliability of each scale for the linked with a greater willingness of SME suppliers to take part variables were tested by conducting a factor analysis and in GSC initiatives. This result re-confirmed how important Cronbach’s alpha, respectively (Table III). For each, the items the government role can be in diffusing environmental loaded on only one factor in all cases, in spite of the low management practices throughout industries, particularly for extracted variance of around 50 percent. As for reliability, the SME suppliers. Governmental direct and/or indirect supports values of Cronbach’s alpha exceeded the recommended cutoff were thought to be external sources of finance, know-how, of 0.70 (Nunnally, 1978), except for the variable of and technology for small firms; thus, these supports facilitated government involvement. Based on the one factor loading innovations in those companies who were suffering from a 193
  10. 10. Drivers in green supply chain initiatives Supply Chain Management: An International Journal Su-Yol Lee Volume 13 · Number 3 · 2008 · 185 –198 Table III Validity and reliability analyses GSC readiness Buyer GSC practices Government involvement GSC participation Items Estimate Items Estimate Items Estimate Items Estimate Ready1 0.59 Buyer1 0.81 Government1 0.70 Participation1 0.77 Ready2 0.74 Buyer2 0.80 Government2 0.67 Participation2 0.79 Ready3 0.85 Buyer3 0.62 Government3 0.60 Participation3 0.66 Ready4 0.85 Buyer4 0.71 Government4 0.72 Participation4 0.78 Ready5 0.87 0.72 Government5 0.60 Ready6 0.78 Eigenvalue 3.69 2.18 2.18 2.25 Variance explained (%) 61.53 54.61 43.55 56.34 Cronbach’s alpha 0.87 0.72 0.67 0.74 Table IV Correlation matrix Mean SD 1 2 3 4 5 1. GSC Readiness 2.67 0.75 2. Buyer GSC practices 2.63 0.99 0.32 * * * 3. Government involvement 3.52 0.66 20.28 * * * 0.07 4. GSC participation 2.92 0.78 0.66 * * * 0.46 * * * 2 0.02 5. Firm sizea 4.11 1.25 0.16 * * 20.08 0.02 2 0.14 * 6. Age of firm 19.08 10.43 20.13 0.27 * * * 0.02 0.36 * * * 0.09 a Notes: The number of observations varies from 130 to 142 because of missing data; Natural logarithm of the number of employees (full-time equivalent); * p-value , 0.10, * * p-value , 0.05, * * * p-value , 0.01 Table V Results of hierarchical linear regression sharing. The result suggested that the more governments were involved in GSC initiatives, the more SME suppliers took part Model 1 Model 2 Hypothesis in them. Beta Beta Support/reject Third, the GSC participation of SME suppliers was directly Control variables related to their readiness. Contrary to our expectation that the Firm size 0.26 * * 0.17 * * * variation in the resources and capabilities of SME suppliers Age of firm 20.02 20.01 was not significant, GSC readiness, consisting of internal Independent variables slack resources and organizational capabilities, was shown to be the most influential determinant for SME suppliers’ Buyer GSC practices 0.18 * * * H1 supported becoming involved in GSC initiatives. This result suggested Government involvement 0.13 * H2 not supported that a resource-based view of the firm, which contended that GSC readiness of suppliers 0.54 * * * H3 supported differences in a firm’s performance could be explained by the Adj-R2 0.15 * * * 0.54 * * * specific resources and capabilities that they own (e.g. DR2 0.39 Wernefelt, 1984; Barney, 1991; Grant, 1991), can be F statistics 12.67 31.46 applied to even SME suppliers. This result provided a No. of observations 129 129 strong theoretical foundation in answering the question of Notes: * p-value , 0.1; * * p-value , 0.05, * * * p-value , 0.01 why firms showed different levels of environmental practice and performance. For example, organizational capabilities, such as continuous improvement, multi cross-functional management, stakeholder integration, and manufacturing lack of internal resources. Actually, in the UK and Korea, innovation were antecedents for proactive environmental there were several support programs driven by the management (e.g., Hart, 1995; Florida, 1996). GSC government to help SMEs improve their environmental readiness represented a series of organizational capabilities, performance (Holt et al., 2001; Lee and Jang, 2003). External such as cross-functional communication and pervasive assistance, such as environmental management consultancy, environmental awareness among managers, as well as the provided free of charge to SMEs through national government availability of internal resources, such as the firm’s financial, funds, alleviated acknowledged internal resource constraints, human, and technical reserves. A GSC initiative has been a therefore encouraging SME suppliers to participate in GSC relatively new and more advanced concept in environmental initiatives. SME suppliers tended to expect that the management practices considering a life-cycle perspective. government be much involved in those initiatives through a Participating in this initiative may require firms to take a more range of activities, including funding for environmental proactive stance in environmental management. Based on this management diffusion programs, building networks, and reasoning, the author concluded that the SME supplier’s national centers for information, knowledge, and best practice participation in GSC initiatives was strongly influenced by its 194
  11. 11. Drivers in green supply chain initiatives Supply Chain Management: An International Journal Su-Yol Lee Volume 13 · Number 3 · 2008 · 185 –198 GSC readiness, which was very consistent with a number of participation of all the players, in particular SME suppliers, is previous studies claiming a positive relationship between guaranteed. This study investigated what factors facilitate firm’s resources and capabilities and its proactive SME suppliers to willingly take part in those initiatives. environmental management performance (e.g. Klassen and According to the results, the willingness of SME suppliers Whybark, 1999; Ghobadian et al., 1998; Hart, 1995), or its to participate in GSC initiatives heavily rested on two corporate sustainable development (e.g. Bansal, 2005). influential factors: buyer GSC practices and supplier GSC This study controlled two variables of firm size and age readiness. Also, government involvement in the initiatives because these variables were known to have influence on the influenced the participation of SME suppliers. SME suppliers adoption of advanced environmental practices. As expected, and large-sized buyers as well as governments who want to firm size proved to affect the GSC participation of SME improve their environmental performance throughout the suppliers as important contextual variables. Even among supply chain can obtain implications from this study. First, SMEs, which ranged from 20 to 300 employees, larger firms consistent with our expectations, buyer GSC practices were thought to be more willing to participate in GSC motivate SME suppliers to participate in inter- initiatives, which were led by buying firms and/or the organizational GSC initiatives. The SME suppliers who are government, than smaller firms. Even though GSC under more environmental pressures and who are provided initiatives were known to lead to operational performance as with environmental support from their buyers are likely to be well as environmental performance of both buying firms and involved in these initiatives. This implies large buying firms their suppliers, financial and human resources were required who intend to reduce the environmental risk engendered by to conduct the initiatives in the beginning stage. SMEs may their supply chains should enhance environmental be more averse to expense the cost of adopting advanced environmental management, which lead to this result that the procurement and support to their suppliers, particularly more resourceful, in other words, bigger suppliers were willing their SME suppliers. Second, we found that the suppliers with to participate in the GSC initiatives. The other control a higher level of environmental awareness, cross-functional variable, firm age, was seen not to have any relationship with communication, and financial, human, and technical slack GSC participation from the results. These additional results, resources have a significantly higher willingness to take part in relating to the control variables, were very consistent with GSC initiatives. SME suppliers should be aware that these environmental management and green supply chain initiatives promote efficiency and synergy with their business management literature (e.g., Vachon and Klassen, 2006; partners, such as their buyers. Furthermore, these initiatives Klassen, 2000). can provide very good external resources that they can easily The survey in this study was conducted based on a stratified access and utilize. Even though SME suppliers are suffering sample where SME suppliers were thought to be more aware from a lack of slack resources, they need to put more effort of external information on governmental support programs into improving their readiness. There are several activities than other SME suppliers excluded in this survey. Except for recommended, such as increasing the managers’ this possible difference, the author expected other external environmental awareness through training and education, conditions that other SME suppliers in Korea encounter, such integrating environmental function into a strategic decision- as pressures and support from their buyers. There was likely making process, and putting more resources into pollution to be no significant differences in firm characteristics, in terms preventive solutions. Third, our research showed a slight of firm size and age, between the surveyed SMEs and other significance in the effect that governments have on SME SMEs in Korea[5]. Therefore, we expect that the results of suppliers participating in GSC initiatives. Governments also this study can be generalized for other SME suppliers in must bear in mind that SME suppliers can have a Korea if we consider a few of the possible specific differences fundamental role in regional and national environmental and limitations. The Korean industrial base, as with that of all improvement as well as economic vitality. Therefore, other countries, primarily consists of SMEs[6]. As the Korean governments should keep encouraging SME suppliers to be economy is heavily dependent on overseas markets, global interested in GSC initiatives. Both a direct way of providing environmental regulations, which are usually transmitted by financial and technical support and an indirect way of large buying firms, have multifaceted implications for Korean coordinating buyers and their suppliers and building a SME suppliers. The results of this paper also implied that this participative atmosphere and infrastructure are strongly model could apply to other countries, such as China and recommended. other Asian countries whose economies heavily rely on SMEs By clarifying the limitations of this paper, we suggest and export. For instance, environmental issues have risen directions for future research. The sample used in this study dramatically in China, which drove the Chinese government was extracted from a specific governmental directory, so it to enforce a RoHS-like regulation. Environmental pressures engendered by export and sales to foreign customers have may not represent all SME suppliers comprehensively. been increasingly intensified on Chinese enterprises and their Moreover, a relatively low response rate and a small number suppliers (Zhu and Sarkis, 2006). of samples might have created grounds for bias. In addition, the fact that each questionnaire was answered by only one respondent can be seen as the third limitation because a single 6. Conclusion respondent is likely to cause common method variance. This Much attention has been paid to the importance of GSC paper awaits further refined studies considering these initiatives, which are inter-organizational projects striving to limitations. In addition, another potentially important improve environmental performance as well as economic variable, the consequence of GSC initiatives in terms of efficiency throughout the entire supply chain. These economic and environmental performance of both buyers and initiatives, however, are successfully implemented only if the suppliers, remains to be explored. 195
  12. 12. Drivers in green supply chain initiatives Supply Chain Management: An International Journal Su-Yol Lee Volume 13 · Number 3 · 2008 · 185 –198 Notes Freel, M.S. (2000), “Strategy and structure in innovative manufacturing SMEs: the case of an English region”, Small 1 The European Union’s directives on the restriction of the Business Economics, Vol. 15 No. 1, pp. 27-45. use of certain hazardous substances (RoHS) and wastes of Friedman, A.L. and Miles, S. (2002), “SMEs and the electric and electronic equipment (WEEE). environment: evaluating dissemination routes and handling 2 Data in 2005 from the web site of the Korea Automobile levels”, Business Strategy and the Environment, Vol. 11, Manufacturers Association, www.kama.or.kr 3 Data in 2003 from the web site of the Korea National pp. 324-41. Statistical Office,www.kosis.nso.go.kr Geffen, C.A. and Rothenberg, S. (2000), “Suppliers and 4 This is a list of the Korean small and medium-sized environmental innovation: the automotive paint process”, enterprises which have been given financial and technical International Journal of Operations & Production support from the Korea Small and Medium Business Management, Vol. 20 No. 2, pp. 166-86. Administration. Ghobadian, A., Viney, H., Liu, J. and James, P. (1998), 5 The total number of small and medium sized enterprises “Extending linear approaches to mapping corporate ranging from 20 to 500 employees in Korea were 8,473 in environmental behavior”, Business Strategy and the 2005. Average annual sales and an average number of Environment, Vol. 7 No. 1, pp. 13-23. employees of these SMEs were US$28.2 million and 119, Grant, D.S., Jones, A.W. and Bergensen, A.J. (2002), respectively. 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