Research Insights-Use Environmental Performance to Get to the Top


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Research Insights-Use Environmental Performance to Get to the Top

  1. 1. research insightsUse Environmental Performance to Get to the TopPressure from customers, shareholders, 2. Don’t let the size of your company become agovernments and the general public pushes firms disadvantage. Larger firms respond slower toto improve their environmental performance – the environmental actions of their competitors,but what about a firm’s competitors? What role putting them at a strategic disadvantage.does competition between companies play in To overcome this strategic pitfall, largerinfluencing environmental practices? companies need to trim their bureaucracies and allow for the timely implementation ofChristian Hofer (University of Arkansas), David E. environmental initiatives.Cantor (Iowa State University) and Jing Dai (IowaState University) asked the same questions. Theylooked at the two largest firms in 48 different “... environmentalmanufacturing industries from 2006 to 2009 andfound that competition within an industry does performance is aaffect environmental performance. valuable source ofSpecifically, the trio found that businesses arelikely to undertake new environmental practices if competitive advantagetheir rivals had improved their own environmentalperformance in the previous year. The reasonfor this is straightforwardness: environmental and companies don’tperformance is a valuable source of competitiveadvantage and companies don’t want to fall want to fall behind.”behind. 3. Maintain industry leadership withThe study also found that smaller companies environmental activities. To maintain therespond faster to their competitors’ environmental top spot, industry leaders must recognizemoves, possibly because they are less and counter the strategic moves of theirconstrained by bureaucracy. Similarly, more competitors. Industry leaders consistently haveprofitable companies are more responsive to inferior environmental performance, whichcompetitors’ environmental strategies, likely puts them at a strategic disadvantage. Closingbecause they have the necessary financial slack. this performance gap is vital, especially considering the growing emphasis put on theFinally, and perhaps most importantly, the study environment.found that industry leaders generally show worseenvironmental performance than their nearest rival. Recognizing the importance of environmentalThis may be because leaders become complacent management and following these simpleand their rivals actively leverage environmental recommendations allows managers to improveperformance to narrow the competitive gap. their competitive standing and the environment at the same time.There are three practical lessons that managerscan take away from this study: Future research should include: investigating more than just the top two competitors in the1. Use environmental activities to get ahead industry; exploring the environmental practices of competitors. Environmental performance of both diversified and private firms; and tracking makes up part of an industry’s competitive the relationship between competition and landscape. Managers need to actively seek environmental performance over a longer time out and analyze the environmental actions period. of their competitors – for much the same reason they analyze competitors’ financial and marketing undertakings. Source: Hofer, Christian, Cantor, David E. and Jing Dai. (2012). The competitive determinants of a firm’s environmental May 2012management activities: Evidence from US manufacturing industries, Journal of Operations Management, 30: 9-84.Summary by: Patrick Shulist and the NBS Team