IDEAS home Printed from https://ideas.repec.org/a/eee/tefoso/v172y2021ics0040162521004832.html
   My bibliography  Save this article

Too little or too much of good things? The horizontal S-curve hypothesis of green business strategy on firm performance

Author

Listed:
  • Lin, Han
  • Chen, Lu
  • Yu, Mingchuan
  • Li, Chao
  • Lampel, Joseph
  • Jiang, Wan

Abstract

Building on the tenets of the combination of institutional and resource-based views, this study aims to shed light on how a firm could benefit from implementing a strategic stance toward exploiting green-related opportunities. Our model integrates ‘too-much-of-a-good-thing’ (TMGT) and ‘too-little-of-a-good-thing’ (TLGT) effects to formulate green business strategy and how this, in turn, influences substantive performance. The association is empirically manifested in a horizontal S-curve, which at first shows that firm performance declines with initially going green, follows by a positive relationship between increasing green business strategy and firm performance, then declines at very high levels of green pursuit. Additionally, the S-curve relationship between green business strategy and firm performance is positively moderated by internal absorptive capacity and external public environmental concern. These findings offer relevant information for a finer-grained interpretation of how and when it pays to be green.

Suggested Citation

  • Lin, Han & Chen, Lu & Yu, Mingchuan & Li, Chao & Lampel, Joseph & Jiang, Wan, 2021. "Too little or too much of good things? The horizontal S-curve hypothesis of green business strategy on firm performance," Technological Forecasting and Social Change, Elsevier, vol. 172(C).
    • Handle: RePEc:eee:tefoso:v:172:y:2021:i:c:s0040162521004832
    DOI: 10.1016/j.techfore.2021.121051
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0040162521004832
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.techfore.2021.121051?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Hockerts, Kai & Wüstenhagen, Rolf, 2010. "Greening Goliaths versus emerging Davids -- Theorizing about the role of incumbents and new entrants in sustainable entrepreneurship," Journal of Business Venturing, Elsevier, vol. 25(5), pages 481-492, September.
    2. Kent Walker & Fang Wan, 2012. "The Harm of Symbolic Actions and Green-Washing: Corporate Actions and Communications on Environmental Performance and Their Financial Implications," Journal of Business Ethics, Springer, vol. 109(2), pages 227-242, August.
    3. Yu, Wantao & Ramanathan, Ramakrishnan & Nath, Prithwiraj, 2017. "Environmental pressures and performance: An analysis of the roles of environmental innovation strategy and marketing capability," Technological Forecasting and Social Change, Elsevier, vol. 117(C), pages 160-169.
    4. Kristel Buysse & Alain Verbeke, 2003. "Proactive environmental strategies: a stakeholder management perspective," Strategic Management Journal, Wiley Blackwell, vol. 24(5), pages 453-470, May.
    5. Clarkson, Peter M. & Li, Yue & Richardson, Gordon D. & Vasvari, Florin P., 2011. "Does it really pay to be green? Determinants and consequences of proactive environmental strategies," Journal of Accounting and Public Policy, Elsevier, vol. 30(2), pages 122-144, March.
    6. Stuart L. Hart & Gautam Ahuja, 1996. "Does It Pay To Be Green? An Empirical Examination Of The Relationship Between Emission Reduction And Firm Performance," Business Strategy and the Environment, Wiley Blackwell, vol. 5(1), pages 30-37, March.
    7. Leonidas C. Leonidou & Paul Christodoulides & Lida P. Kyrgidou & Dayananda Palihawadana, 2017. "Erratum to: Internal Drivers and Performance Consequences of Small Firm Green Business Strategy: The Moderating Role of External Forces," Journal of Business Ethics, Springer, vol. 140(3), pages 607-607, February.
    8. Jansen, J.J.P. & van den Bosch, F.A.J. & Volberda, H.W., 2005. "Managing Potential and Realized Absorptive Capacity: How do Organizational Antecedents matter?," ERIM Report Series Research in Management ERS-2005-025-STR, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    9. S. Zeng & X. Xu & H. Yin & C. Tam, 2012. "Factors that Drive Chinese Listed Companies in Voluntary Disclosure of Environmental Information," Journal of Business Ethics, Springer, vol. 109(3), pages 309-321, September.
    10. Andrew King & Michael Lenox, 2002. "Exploring the Locus of Profitable Pollution Reduction," Management Science, INFORMS, vol. 48(2), pages 289-299, February.
    11. Pinkse, Jonatan & Kuss, Matthias J. & Hoffmann, Volker H., 2010. "On the implementation of a 'global' environmental strategy: The role of absorptive capacity," International Business Review, Elsevier, vol. 19(2), pages 160-177, April.
    12. Michael L. Barnett & Robert M. Salomon, 2012. "Does it pay to be really good? addressing the shape of the relationship between social and financial performance," Strategic Management Journal, Wiley Blackwell, vol. 33(11), pages 1304-1320, November.
    13. Subhabrata Bobby Banerjee, 2001. "Managerial perceptions of corporate environmentalism: interpretations from industry and strategic implications for organizations," Journal of Management Studies, Wiley Blackwell, vol. 38(4), pages 489-513, June.
    14. Yang Chen & Guiyao Tang & Jiafei Jin & Ji Li & Pascal Paillé, 2015. "Linking Market Orientation and Environmental Performance: The Influence of Environmental Strategy, Employee’s Environmental Involvement, and Environmental Product Quality," Journal of Business Ethics, Springer, vol. 127(2), pages 479-500, March.
    15. Bulent Menguc & Seigyoung Auh & Lucie Ozanne, 2010. "The Interactive Effect of Internal and External Factors on a Proactive Environmental Strategy and its Influence on a Firm's Performance," Journal of Business Ethics, Springer, vol. 94(2), pages 279-298, June.
    16. Stephen Brammer & Andrew Millington, 2008. "Does it pay to be different? An analysis of the relationship between corporate social and financial performance," Strategic Management Journal, Wiley Blackwell, vol. 29(12), pages 1325-1343, December.
    17. Newton, Joshua D. & Tsarenko, Yelena & Ferraro, Carla & Sands, Sean, 2015. "Environmental concern and environmental purchase intentions: The mediating role of learning strategy," Journal of Business Research, Elsevier, vol. 68(9), pages 1974-1981.
    18. Han Lin & Saixing Zeng & Liangyan Wang & Hailiang Zou & Hanyang Ma, 2016. "How Does Environmental Irresponsibility Impair Corporate Reputation? A Multi‐Method Investigation," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 23(6), pages 413-423, November.
    19. Meini Han & Han Lin & Jiangyan Wang & Yunzhen Wang & Wan Jiang, 2019. "Turning corporate environmental ethics into firm performance: The role of green marketing programs," Business Strategy and the Environment, Wiley Blackwell, vol. 28(6), pages 929-938, September.
    20. Niron Hashai, 2015. "Within-industry diversification and firm performance—an S-shaped hypothesis," Strategic Management Journal, Wiley Blackwell, vol. 36(9), pages 1378-1400, September.
    21. Fraj, Elena & Matute, Jorge & Melero, Iguácel, 2015. "Environmental strategies and organizational competitiveness in the hotel industry: The role of learning and innovation as determinants of environmental success," Tourism Management, Elsevier, vol. 46(C), pages 30-42.
    22. Freedman, Martin & Jaggi, Bikki, 1994. "Analysis of the association between pollution performance and input cost factors: The case of electric utility plants," Journal of Accounting and Public Policy, Elsevier, vol. 13(1), pages 31-48.
    23. Ben Lahouel, Béchir & Bruna, Maria-Giuseppina & Ben Zaied, Younes, 2020. "The curvilinear relationship between environmental performance and financial performance: An investigation of listed french firms using panel smooth transition model," Finance Research Letters, Elsevier, vol. 35(C).
    24. Pavan Sukhdev, 2012. "The corporate climate overhaul," Nature, Nature, vol. 486(7401), pages 27-28, June.
    25. Lin, Han & Zeng, Saixing & Liu, Haijian & Li, Chao, 2020. "Bridging the gaps or fecklessness? A moderated mediating examination of intermediaries’ effects on corporate innovation," Technovation, Elsevier, vol. 94.
    26. Xiaorui Wang, 2019. "The National Ecological Accounting and Auditing Scheme as an Instrument of Institutional Reform in China: A Discourse Analysis," Journal of Business Ethics, Springer, vol. 154(3), pages 587-603, February.
    27. Lucas, Marilyn T. & Noordewier, Thomas G., 2016. "Environmental management practices and firm financial performance: The moderating effect of industry pollution-related factors," International Journal of Production Economics, Elsevier, vol. 175(C), pages 24-34.
    28. Edward J. Zajac & Matthew S. Kraatz & Rudi K. F. Bresser, 2000. "Modeling the dynamics of strategic fit: a normative approach to strategic change," Strategic Management Journal, Wiley Blackwell, vol. 21(4), pages 429-453, April.
    29. Leonidas C. Leonidou & Paul Christodoulides & Lida P. Kyrgidou & Daydanda Palihawadana, 2017. "Internal Drivers and Performance Consequences of Small Firm Green Business Strategy: The Moderating Role of External Forces," Journal of Business Ethics, Springer, vol. 140(3), pages 585-606, February.
    30. Heather Dixon-Fowler & Daniel Slater & Jonathan Johnson & Alan Ellstrand & Andrea Romi, 2013. "Beyond “Does it Pay to be Green?” A Meta-Analysis of Moderators of the CEP–CFP Relationship," Journal of Business Ethics, Springer, vol. 112(2), pages 353-366, January.
    31. Abagail McWilliams & Donald Siegel, 2000. "Corporate social responsibility and financial performance: correlation or misspecification?," Strategic Management Journal, Wiley Blackwell, vol. 21(5), pages 603-609, May.
    32. Ricky Y. K. Chan, 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, Wiley Blackwell, vol. 42(3), pages 625-672, May.
    33. Leena Lankoski, 2008. "Corporate responsibility activities and economic performance: a theory of why and how they are connected," Business Strategy and the Environment, Wiley Blackwell, vol. 17(8), pages 536-547, December.
    34. Prajogo, Daniel I., 2016. "The strategic fit between innovation strategies and business environment in delivering business performance," International Journal of Production Economics, Elsevier, vol. 171(P2), pages 241-249.
    35. Christine Oliver, 1997. "Sustainable competitive advantage: combining institutional and resource‐based views," Strategic Management Journal, Wiley Blackwell, vol. 18(9), pages 697-713, October.
    36. Renate E. Meyer & Markus A. Höllerer, 2014. "Does Institutional Theory Need Redirecting?," Journal of Management Studies, Wiley Blackwell, vol. 51(7), pages 1221-1233, November.
    37. Nicole Darnall & Irene Henriques & Perry Sadorsky, 2010. "Adopting Proactive Environmental Strategy: The Influence of Stakeholders and Firm Size," Journal of Management Studies, Wiley Blackwell, vol. 47(6), pages 1072-1094, September.
    38. Holger Patzelt & Dean A. Shepherd, 2011. "Recognizing Opportunities for Sustainable Development," Entrepreneurship Theory and Practice, , vol. 35(4), pages 631-652, July.
    39. Julia Hartmann & Stephan Vachon, 2018. "Linking Environmental Management to Environmental Performance: The Interactive Role of Industry Context," Business Strategy and the Environment, Wiley Blackwell, vol. 27(3), pages 359-374, March.
    40. Christoph Trumpp & Thomas Guenther, 2017. "Too Little or too much? Exploring U‐shaped Relationships between Corporate Environmental Performance and Corporate Financial Performance," Business Strategy and the Environment, Wiley Blackwell, vol. 26(1), pages 49-68, January.
    41. Liu, Zuoming, 2020. "Unraveling the complex relationship between environmental and financial performance ─── A multilevel longitudinal analysis," International Journal of Production Economics, Elsevier, vol. 219(C), pages 328-340.
    42. Michael E. Porter & Claas van der Linde, 1995. "Toward a New Conception of the Environment-Competitiveness Relationship," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 97-118, Fall.
    43. Lioui, Abraham & Sharma, Zenu, 2012. "Environmental corporate social responsibility and financial performance: Disentangling direct and indirect effects," Ecological Economics, Elsevier, vol. 78(C), pages 100-111.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Xie, Xuemei & Han, Yuhang & Hoang, Thu Thao, 2022. "Can green process innovation improve both financial and environmental performance? The roles of TMT heterogeneity and ownership," Technological Forecasting and Social Change, Elsevier, vol. 184(C).
    2. Kusa, Rafał & Suder, Marcin & Duda, Joanna, 2023. "Impact of greening on performance in the hospitality industry: Moderating effect of flexibility and inter-organizational cooperation," Technological Forecasting and Social Change, Elsevier, vol. 190(C).
    3. Lin, Chao & Cai, Peipei, 2023. "Analyzing the impacts of natural resource utilization and green economic growth in China: Evidence from a econometric analysis," Resources Policy, Elsevier, vol. 81(C).
    4. Nie, Xinyu & Yu, Mingchuan & Zhai, Yuming & Lin, Han, 2022. "Explorative and exploitative innovation: A perspective on CEO humility, narcissism, and market dynamism," Journal of Business Research, Elsevier, vol. 147(C), pages 71-81.
    5. Wang, Lin & Dilanchiev, Azer & Haseeb, Mohammad, 2022. "The environmental regulation and policy assessment effect on the road to green recovery transformation," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 914-929.
    6. Yu, Yiling, 2023. "Role of Natural resources rent on economic growth: Fresh empirical insight from selected developing economies," Resources Policy, Elsevier, vol. 81(C).
    7. Yuming Zhai & Zhenghuan Cai & Han Lin & Ming Yuan & Ye Mao & Mingchuan Yu, 2022. "Does better environmental, social, and governance induce better corporate green innovation: The mediating role of financing constraints," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 29(5), pages 1513-1526, September.
    8. Jiang, Shuiquan & Yang, Jie & Yu, Mingchuan & Lin, Han & Li, Chao & Doty, Harold, 2022. "Strategic conformity, organizational learning ambidexterity, and corporate innovation performance: An inverted U-shaped curve?," Journal of Business Research, Elsevier, vol. 149(C), pages 424-433.
    9. Siedschlag, Iulia & Yan, Weijie, 2023. "Do green investments improve firm performance? Empirical evidence from Ireland," Technological Forecasting and Social Change, Elsevier, vol. 186(PB).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ben Lahouel, Béchir & Ben Zaied, Younes & Managi, Shunsuke & Taleb, Lotfi, 2022. "Re-thinking about U: The relevance of regime-switching model in the relationship between environmental corporate social responsibility and financial performance," Journal of Business Research, Elsevier, vol. 140(C), pages 498-519.
    2. Christoph Trumpp & Thomas Guenther, 2017. "Too Little or too much? Exploring U‐shaped Relationships between Corporate Environmental Performance and Corporate Financial Performance," Business Strategy and the Environment, Wiley Blackwell, vol. 26(1), pages 49-68, January.
    3. Christina W. Y. Wong & Xin Miao & Shuang Cui & Yanhong Tang, 2018. "Impact of Corporate Environmental Responsibility on Operating Income: Moderating Role of Regional Disparities in China," Journal of Business Ethics, Springer, vol. 149(2), pages 363-382, May.
    4. Markus Hang & Jerome Geyer‐Klingeberg & Andreas W. Rathgeber, 2019. "It is merely a matter of time: A meta‐analysis of the causality between environmental performance and financial performance," Business Strategy and the Environment, Wiley Blackwell, vol. 28(2), pages 257-273, February.
    5. Noordewier, Thomas G. & Lucas, Marilyn T., 2020. "On being green and profitable: Does industry context matter?," International Journal of Production Economics, Elsevier, vol. 223(C).
    6. Meini Han & Han Lin & Jiangyan Wang & Yunzhen Wang & Wan Jiang, 2019. "Turning corporate environmental ethics into firm performance: The role of green marketing programs," Business Strategy and the Environment, Wiley Blackwell, vol. 28(6), pages 929-938, September.
    7. Ruiqian Li & Ramakrishnan Ramanathan, 2018. "Impacts of Industrial Heterogeneity and Technical Innovation on the Relationship between Environmental Performance and Financial Performance," Sustainability, MDPI, vol. 10(5), pages 1-25, May.
    8. Han Lin & Lu Chen & Ming Yuan & Mingchuan Yu & Ye Mao & Fuwen Tao, 2021. "The eco‐friendly side of narcissism: The case of green marketing," Sustainable Development, John Wiley & Sons, Ltd., vol. 29(6), pages 1111-1122, November.
    9. Misani, Nicola & Pogutz, Stefano, 2015. "Unraveling the effects of environmental outcomes and processes on financial performance: A non-linear approach," Ecological Economics, Elsevier, vol. 109(C), pages 150-160.
    10. Liu, Chelsea, 2018. "Are women greener? Corporate gender diversity and environmental violations," Journal of Corporate Finance, Elsevier, vol. 52(C), pages 118-142.
    11. Franck Brulhart & Sandrine Gherra & Bertrand V. Quelin, 2019. "Do Stakeholder Orientation and Environmental Proactivity Impact Firm Profitability?," Journal of Business Ethics, Springer, vol. 158(1), pages 25-46, August.
    12. Corsini, Filippo & Appio, Francesco Paolo & Frey, Marco, 2019. "Exploring the antecedents and consequences of environmental performance in micro-enterprises: The case of the Italian craft beer industry," Technological Forecasting and Social Change, Elsevier, vol. 138(C), pages 340-350.
    13. X. H. Meng & S. X. Zeng & X. M. Xie & G. Y. Qi, 2016. "The impact of product market competition on corporate environmental responsibility," Asia Pacific Journal of Management, Springer, vol. 33(1), pages 267-291, March.
    14. Xue Yang & Yuandi Wang & Die Hu & Yongqiang Gao, 2018. "How industry peers improve your sustainable development? The role of listed firms in environmental strategies," Business Strategy and the Environment, Wiley Blackwell, vol. 27(8), pages 1313-1333, December.
    15. Sergio Manrique & Carmen-Pilar Martí-Ballester, 2017. "Analyzing the Effect of Corporate Environmental Performance on Corporate Financial Performance in Developed and Developing Countries," Sustainability, MDPI, vol. 9(11), pages 1-30, October.
    16. Thi Thu Hien Phan & Hiep Xuan Tran & Trung Thanh Le & Ninh Nguyen & Simon Pervan & Manh Dung Tran, 2020. "The Relationship between Sustainable Development Practices and Financial Performance: A Case Study of Textile Firms in Vietnam," Sustainability, MDPI, vol. 12(15), pages 1-20, July.
    17. Binh Do & Ninh Nguyen, 2020. "The Links between Proactive Environmental Strategy, Competitive Advantages and Firm Performance: An Empirical Study in Vietnam," Sustainability, MDPI, vol. 12(12), pages 1-22, June.
    18. Binh Do & Uyen Nguyen & Ninh Nguyen & Lester W. Johnson, 2019. "Exploring the Proactivity Levels and Drivers of Environmental Strategies Adopted by Vietnamese Seafood Export Processing Firms: A Qualitative Approach," Sustainability, MDPI, vol. 11(14), pages 1-22, July.
    19. Ki‐Hoon Lee & Beom Cheol Cin & Eui Young Lee, 2016. "Environmental Responsibility and Firm Performance: The Application of an Environmental, Social and Governance Model," Business Strategy and the Environment, Wiley Blackwell, vol. 25(1), pages 40-53, January.
    20. Weiwei Wu & Rizwan Ullah & Syed Jamal Shah, 2020. "Linking Corporate Environmental Performance to Financial Performance of Pakistani Firms: The Roles of Technological capability and Public awareness," Sustainability, MDPI, vol. 12(4), pages 1-18, February.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:tefoso:v:172:y:2021:i:c:s0040162521004832. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.sciencedirect.com/science/journal/00401625 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.