Environmental investment decisions of family firms—An analysis of competitor and government influence

Prior research suggests that family firms are more likely to engage in environment‐friendly practices. However, the source of this difference is less clear. This study investigates how environmental innovations and stakeholder pressure tradeoffs (specifically from competitors and government) are simultaneously evaluated within family and nonfamily firms. An experimental rating‐based conjoint methodology was used to capture and analyze 1936 firm environmental innovation investment decisions. The results indicate that firms were significantly more likely to invest in an environmental innovation that helped reduce regulatory oversight, and less likely to do so when it leads to a negative reputation among their industry peers. The findings also suggest that while firms will make an environmental innovation investment decisions to keep the government close, they are much more likely to avoid these investments if doing so will negatively impact their reputation among their peers—thus keeping their competitors closer. However, the results also demonstrated that family firms who were highly engaged with their peers were significantly less influenced by the possibility of negative peer reputation repercussions when making investment decisions compared with other firms. This research contributes to the development of a more comprehensive theoretical synthesis among the fields of corporate social responsibility (CSR), family business, and stakeholder theory.