Pan-Pacific Conference XXXIV. Designing New Business Models in Developing Economies

The influence of regulation and incentives, and managers’ environmental attitudes
on firms’ environmental management. a theoretical framework
Diaz, Claudia P.
CENTRUM GBS, Pontificia Universidad Catolica del Peru,
Masstricht School of Management
ABSTRACT
Managerial practices regarding environmental
concerns and the capability of environmental laws to
hinder business competitiveness depicted Peruvian
comparative weaknesses. In addition, firms’
environmental management has been considered a
proactive behavior and an organizational capability.
This paper, based on the conjoint application of neoinstitutional
and the resource-based theories, and their
microfoundations, will propound a theoretical
framework to assess the relationship among
regulation and incentives, managers’ environmental
attitudes, and firms’ environmental management.
.
INTRODUCTION
Environmental issues were considered as a complex
[32], opaque [32] and uncertain [2][32] field. Firms,
in an institutional complex context, made decisions
under incompatible and multiple institutional logics
[16]. In addition, the literature acknowledged that the
link between environmental performance and
financial performance was not straightforward
[2][14].The literature also considered environmental
management as a proactive firm behavior or strategy
[21] and described sustainability as a dynamic
organizational capability [7]. Proactive environmental
management allowed to firms to deal with uncertainty
[3], and opacity [32]. Firms also could transform
environmental management in strategies and
competitive advantages [3][12]. In this context,
institutions and managers’ attitudes have been
pointed out as relevant factors [7][15][21], which
explained the adoption of sustainable practices. With
regard to that, authors pointed out the relevance to
study this topic in developing countries [33] and in
dysfunctional institutional environments [31]. A
theoretical framework based on neo-institutional and
resource-based theories could support researches in
developing countries with institutional weakness,
such as Peru.
A FRAMEWORK BASED ON NEO-
INSTITUTIONAL AND RESOURCE-BASED
THEORIES
The literature propounded a connectedness between
neo-institutional and resource-based theories
[11][17][22][23]. The relevance of specific resources
and capabilities suggested by the resource-based
theory was acknowledged; nonetheless, the literature
remarked that this theory did not examine the social
context and legitimacy, and their effects on firms’
competitive advantage [23]. Concepts that emerged
from both theories suggested a theoretical framework
that incorporated institutions, managerial attitudes,
and firms’ capabilities and environmental practices.
First, the neo-institutional theory of organizations
propounded that firms conformed with the pressure
exerted by institutions looking for legitimacy [13]
[30][31]. Through legitimacy, firms’ practices were
perceived as desirable, proper, and appropriate [31]
and they received acceptance and endorsement [9] by
social actors. Legitimacy also enabled the
achievement of competitive advantage [23], and the
firms’ survival [31]. Institutions referred to
regulative, normative, and cultural-cognitive
elements that “provide stimulus, guidelines, and
resources for acting as well as prohibitions and
constraints on action” [27, p. 58]. Institutional
pressures encompassed (a) coercive, (b) normative,
and (c) mimetic social forces [13] 1 . Coercive
mechanisms alluded to formal and informal pressures
and could “be felt as force, as persuasion, or as
invitations to join in collusion” [13, p. 150].
Furthermore, the theory incorporated a separation
criterion between market and non-market forces [6]
and it was the base for the classification of pressures
by their origins [11]. Under these concepts,
regulation 2 and incentives were classified as nonmarket
forces [11], and coercive pressure [33] or
regulative pillar [31].
PERUVIAN CONTEXT
Managerial practices regarding environmental
concerns is one of Peruvian comparative weaknesses.
Peru was ranked in the 55th position out 61 countries
with a score of 4.70 out of 10 in the item related to
health, safety and environmental managerial
practices, and in the 58th position of 61 countries
with a score of 4.36 out of 10 in the item related to
the prioritization in companies of sustainable
development [19]. In addition, Peru was ranked in the
60th position out 61 countries with a score of 4.25 out
of 10 in the item related to the capability of Peruvian
environmental laws to hinder business
competitiveness [19].
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1 Thereafter, the literature suggested an additional
classification based in three pillars: (a) regulative, (b)
normative, and (c) cognitive [27].
2 Regulation and incentive referred to legislation,
standards, and rules that include imposition and
inducement elements [33]. With regard to that,
regulation was a concept under debate [20]. Not only
was the nature of the regulator under discussion
(public, or public and private), but also the
incorporation of indirect intervention [20].
Nevertheless, it commonly referred to the
intervention of public-sector actors on the activities
of private-sector [20].