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Write a short 2-page review of the article, utilizing at least one other outside source (not the textbooks or the article). Make sure to tie in the concepts we have read about so far in the course. .pdf Unformatted Attachment Preview The Influence of Corporate Environmental Ethics on Competitive Advantage: The Mediation Role of Green Innovation Author(s): Ching-Hsun Chang Source: Journal of Business Ethics, Vol. 104, No. 3 (December 2011), pp. 361-370 Published by: Springer Stable URL: https://www.jstor.org/stable/41476093 Accessed: 15-01-2020 07:46 UTC REFERENCES Linked references are available on JSTOR for this article: https://www.jstor.org/stable/41476093?seq=1&cid=pdf-reference#references_tab_contents You may need to log in to JSTOR to access the linked references. JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org. Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at https://about.jstor.org/terms Springer is collaborating with JSTOR to digitize, preserve and extend access to Journal of Business Ethics This content downloaded from 198.179.130.111 on Wed, 15 Jan 2020 07:46:45 UTC All use subject to https://about.jstor.org/terms J Bus Ethics (2011) 104:361-370 DOI 10.1 007/s 1055 1-01 1-091 4-х The Influence of Corporate Environmental Ethics on Competitive Advantage: The Mediation Role of Green Innovation Ching-Hsun Chang Received: 19 February 2011 /Accepted: 23 May 2011 /Published online: 4 June 2011 © Springer Science+Business Media B.V. 2011 Abstract This study utilizes structural equation modeling pressure. In previous times, investing in environmental (SEM) to explore the positive effect of corporate environmental ethics on competitive advantage in the Tai- activities is an unnecessary investment. However, the strict environmental regulations and popular environmentalism wanese manufacturing industry via the mediator: green have changed the competitive rules and patterns for com- innovation performance. This study divides green innova- panies (Porter and van der Linde 1995). Green innovation tion into green product innovation and green process innovation. The empirical results show that corporate environmental ethics positively affects green product can be divided into green products and processes, including innovation and green process innovation. In addition, this uct designs, or corporate environmental management (Chen et al. 2006). If companies are willing to undertake green innovation enthusiastically, they can obtain the advantage from differentiation and low cost which Can even change the existing competitive rules (Porter 1981; Porter and van der Linde 1995). Therefore, it is more study verifies that green product innovation mediates the positive relationship between corporate environmental ethics and competitive advantage, but green process innovation does not. Therefore, corporate environmental ethics can not only affect competitive advantage directly, but also influence it indirectly via green product innovation in the Taiwanese manufacturing industry. Taiwanese manufacturing companies can increase their corporate environmental ethics and green product innovation to enhance their competitive advantages. the innovation in technologies that are involved in energysaving, pollution-prevention, waste recycling, green prod- widely accepted that green management is profitable nowadays (Porter and van der Linde 1995; Sharma 2000). Being green is a catalyst for continuous innovation, new market opportunity, and wealth creation (Walley and Whitehead 1994). Green innovations may embody the concept of environmental protection into the design and package Keywords Corporate environmental ethics • Green of products to increase their differentiation advantages product innovation • Green process innovation • (Chen et al. 2006; Hart 1995). Investing resources on envi- Competitive advantage ronmental management would not only avoid the trouble of protests or punishment about environmental protection, but also enhance their production efficiency, develop new Introduction environmental markets, and thereby increase their capabil- ities of green innovation (Chen 2008a). Porter (1980) and Green innovation has become one of the important strate- Barney (1991) defined competitive advantages of a company as a condition under which competitors are unable to repligic tools to obtain sustainable development in manufac- turing industries because of the increasing environmentalcate its competitive strategies executed by the company. Previous research argues that the relationship between green innovation and competitiveness is positive in Taiwanese C.-H. Chang (El) Department of Business Administration, Tamkang University, 151 Ying-chuan Road, Tamsui, New Taipei City 25137, Taiwan e-mail: dr.chang.ch@gmail.com information and electronics industries (Chen et al. 2006). Green innovations can enhance the product value and, thus, offset the costs of environmental investments. Eventually, â Springer This content downloaded from 198.179.130.111 on Wed, 15 Jan 2020 07:46:45 UTC All use subject to https://about.jstor.org/terms 362 C.-H. Chang green innovations improve resources productivity and make It indicates that companies social objective is not always companies more excellent (Porter and van der Linde 1995). profit maximization, and their activities usually meet Environmental management is getting important for com- external pressures for legitimacy. To gain the trust of panies in the dynamic global environment, and more com- external institutions, companies have a good reason to green panies are willing to put more efforts on developing green their products and to undertake green innovations, innovations. Therefore, developing green innovations is a According to resource-based view (RBV), competitive win-win solution for the conflict between economic devel- advantage results from the key resources and capabilities of opment and environmental protection. companies (Barney 1991; Orsato 2006). RBV argues that Green innovation can improve the performance of environmental social responsibility can become a key environmental management to satisfy the requirement of capability that leads to a sustained competitive advanenvironmental regulations in Taiwan (Chen et al. 2006). tage (Hart 1995). There are several environmental forces However, research which deals with the antecedent of impacting firms operation which are stakeholder activism green innovation is scant in professional literature. This and environmentalism, competitive pressures, national study examines corporate environmental ethics as an environmental policies, and international environmental antecedent of green innovation, thereby providing insight regulations (Rugman and Verbeke 1998). Thus, companies into green innovation which plays a mediating role have to carry out environmental management to comply between corporate environmental ethics and competitive with international environmental regulations and consumer advantage in Taiwanese manufacturing industry. Barney environmentalism (Berry and Rondinelli 1998). Hence, (1986) argued that if a firms culture is valuable, unique, environmental management can be an important element of and imperfectly imitable, then its culture can provide sus- a firms strategies, and it should be considered as a unique tainable competitive advantages. Green management is not capability of firms from the RBV logic (Hart 1995). only as a defensive mechanism to retain legitimacy, but Prior literature on corporate social responsibility posits also as a centerpiece of an organizations mission to attain that companies have social responsibilities that may reinsustainable development (Marcus and Fremeth 2009). force their economic objectives (Wood and Jones 1995). Corporate environmental ethics is one of the key elements Companies undertake environmental management because of organizational culture which is associated with innova- they hope to be socially responsible. Although corporate tiveness (Peng and Lin 2008). Corporate environmental environmental management may not probably increase ethics formalizes corporate value and expectation for eth- profits in the short term, it could have economic payoffs in ical behavior, so it is a driving force for green innovation the long term (Hart and Ahuja 1997). Additionally, stake- and competitive advantage. holder theory argues that firms should take into account The structure of this study is as follows. In the second the interests of their multiple stakeholders to form section, a literature review is discussed and five hypotheses late their strategies to gain the trust and support from the are also proposed in this section. In the third section, this key stakeholders (Freeman 1984; Mitchell et al. 1997) study describes the methodology, the sample and data firms only pay attention to economic goals, incorporati collection, and the measurements of the constructs. In the environmental management into their strategies may be fourth section, the descriptive statistics, reliability of the impossible (Drumwright 1994). Firms should undertake a measurement, factor analysis, correlation coefficients long-term sustainable thinking that relies on non-econom between constructs, and the results of measurement and goals as well as institutional and stakeholder pressur structural model are shown. In the fifth section, this study (Prakash 2002). mentions the discussions about the findings and implica- Corporate environmental management allows com tions, and possible directions for future studies. nies to shape environmental competitive rules and thereby to reap first-mover advantages (Peattie 1992; Peattie and Ratnayaka 1992). Adopting environmental management Literature Review and Hypothesis Development usually forces firms to apply strict environmental standard into their green products or processes which can create Corporate Environmental Management high-entry barriers (Barrett 1991). Firms could get support from external institutions and key stakeholders and further Companies may determine to adopt environmental man- obtain competitive advantages (Vogel 1995). Hence, the agement because of external environmental pressures. positive relationship between competitive advantage and Although neoclassical economists think maximizing corporate environmental activities can be supported from shareholders wealth as companies main goal (Friedman the previous literature about institutional theory, stake1970), institutional theory pays attention to the impacts of holder theory, RBV, and corporate social responsibility external institutions about firms strategies (Hoffman 1997). (Prakash 2002). ^ Springer This content downloaded from 198.179.130.111 on Wed, 15 Jan 2020 07:46:45 UTC All use subject to https://about.jstor.org/terms The Mediation The Positive Role Effect on Green Product and Process Innovation of Green Innovation 363 sustainable competitive advantage (Barney of generate Corporate Environmental 1986). Corporate environmental ethics is regarded as one kind of superior corporate culture to attain sustainable Green innovation is the improvement of products or pro- development. Hence, corporate environmental ethics of cesses about energy-saving, pollution-prevention, wastecompanies can stimulate their proactive environmental recycling, green product designs, and corporate environ- actions that can facilitate their green innovations (Chen mental management in the field of environmental man- et al. 2006; Porter and van der Linde 1995). Consequently, agement (Chen et al. 2006). This study divides green this study implies the following hypothesis: innovation into green product innovation and green process Hypothesis 1 (Hi) Corporate environmental ethics is innovation. Green innovation can enhance the performance positively associated with green product innovation. of environmental management to satisfy the requirements of environmental protection. A company devotes to Hypothesis 2 (H2) Corporate environmental ethics is develop green innovation can not only meet the environ- positively associated with green process innovation. mental regulations, but also build up the barriers to the other competitors (Barney 1991; Chen et al. 2006). Previ- The Positive Effect of Green Product and Process ously, many companies thought investing in environmentalInnovation on Competitive Advantages management was an unnecessary investment (Porter and van der Linde 1995). Recently, there are more positiveCompetitive advantages is defined as a condition which associations between corporate environmental ethics and competitors are not able to replicate its competitive strat- green innovation. Companies should change their strategies egies executed by the company, nor are competitors able to and operations so that they can comply with the trend of acquire the benefit that the company obtains by means of environmental ism. Companies with high-environmental its competitive strategies (Barney 1991; Coyne 1986; ethics are prone to increase resource productivity through Porter 1980). Value, rareness, imitability, and unsubstitutgreen innovation to make up the environmental costs (Chenability are the characteristics of resources of companies et al. 2006). Green innovation can improve product value which are helpful for innovation and companies can exploit and, thus, offset the costs of improving environmental them to gain competitive advantages (Learned 1969; Porter impact. Ultimately, green innovation can further raise 1981). Innovation can create isolation mechanisms resources productivity and make companies more com- which protect profit margins and allow benefits to be petitive (Porter and van der Linde 1995). gained for companies. Innovation is a key source of com- Companies require the motivation and ability to pro-petitive advantage in the era of knowledge economy duce creative and innovative ideas to develop new prod-(Daghfous 2004; Prajogo and Ahmed 2006). Innovation ucts or processes (Chen and Huang 2009). Previous enables companies to create and deploy their capabilities studies pointed out that the well-defined policies andthat support the long-run business performance (Teece processes in companies have positive effect on their 2007). Successful innovation can make external imitation innovation (Stewart 1994). Therefore, well-defined envi- more difficult and allow firms to sustain their advantages ronmental policies can facilitate and integrate the opera- better (García-Morales et al. 2007). Companies pioneering in the green innovation can obtain tions among different departments in companies and solve the environmental problems (Porter and van der Linde the competitive advantages and enable them to sell their 1995). Corporate environmental ethics highlights the role environmental technologies or services, to improve their of proactive environmental management (Weaver et al. corporate images and even to create new markets (Chen 1999b). The environmental ethics in a company can et al. 2006; Hart 1995, 1997; Peattie 1992; Porter and van influence innovation of environmental technology and der Linde 1995). Companies investing more commitments business operation (Greeno and Robinson 1992; Schle- in environmental management and green innovation gelmilch et al. 1996). This study argues that corporate actively can not only minimize production waste, but also environmental ethics plays an important role in the green enhance the overall productivity, increase corporate repuinnovation of a company. Top management concerns tation, and thereby increase corporate competitive advan- relate positively to the scope and speed of a firmstages under the trends of the popular environmentalism of responses to environmental issues (Eiadat et al. 2008). The consumers and severe international regulations of envirole of management is crucial in establishing a companys ronmental protection (Berry and Rondinelli 1998; Chen norms and expectations about ethics (Tushman andet al. 2006; Porter and van der Linde 1995). Moreover, OReilly 1997). Based on RBV, outstanding corporate green innovation can create isolation mechanisms which culture which is typically valuable, rare, inimitable, and protect profit margins and allow benefits to be gained for non-substitutable can be viewed as one of key resources tocompanies. Ô Springer This content downloaded from 198.179.130.111 on Wed, 15 Jan 2020 07:46:45 UTC All use subject to https://about.jstor.org/terms Et 364 C.-H. In this study, green innovation is divided into green Chang impacts, corporations should invest resources to achieve product innovation and green process innovation. There are their goal of sustainable development. Corporate environ- two sources of competitive advantage: differentiation and mental ethics formalize company values and expectations low cost (Porter 1980). A company can use differentiation for ethical behavior. Companies that have high environ- strategies to create unique features for its new products. mental ethics standards can not only avoid the troubles that Differentiation strategy can facilitate companies to pay off come with environmental protection protests, but also improve their corporate images (Chen et al. 2006). ecological investments (Orsato 2006; Chen et al. 2006). Green product innovation of a company can improve product design, quality, and reliability with respect to Therefore, environmental management may lead to longterm economic gains. Competitive advantage is a condition environmental concern which can yield a better chance to under which companies occupy some niche positions differentiate its green products such that the company can where their competitors cannot imitate their successful charge higher prices and make better profit margins for environmental strategies and they can gain the sustainable their green products (Chen 2008a). A company can adopt benefits (Porter 1980; Porter and van der Linde 1995). A green product innovation to enhance its green image (Chen company devoted to develop its corporate environmental 2010). Therefore, the company can obtain competitive ethics can not only meet the environmental regulations, but advantage through green product innovation (Chen et al. also build up the barriers to the other competitors. Com- 2006). On the other hand, green process innovation can panies can enhance competitive advantage through reduce the cost for companies. Previous literature argues improving their intangible assets (Chen 2008b). Environ- that pollution is the concrete evidence of inefficient uses of mental ethics can be regarded as companies intangible resources (Porter and van der Linde 1995; Chen 2011). assets. Companies can occupy some positions about envi- Investing more resources in green process innovation can not only minimize production waste, but also enhance ronmental protection where competitors cannot copy their successful environmental strategies and gain the resource efficiency (Porter 1980; Porter and van der Linde sustainable benefits from these successful environmental 1995). Companies can adopt green process innovation to strategies. Therefore, this study proposes the following enhance resource productivity by means of material saving, hypothesis: energy decreasing, waste recycling, and resource reducing (Chen 2008a). Green process innovation can not only prevent costly pollution, but also reduce resource expense and overall cost (Orsato 2006; Berrone 2009). Companies can continue to undertake green process innovation to raise their manufacturing efficiency and productivity such that they can obtain low cost advantage (Chen 2008a). A company can adopt green ... Purchase answer to see full attachment