A Study on the Discriminative Effect of Customization and Process Innovation Level on the Relationship between Environmental, Ethical Management Practice and Corporate Performance

Abstract

Our first research question was to confirm whether there is a positive relationship between environmental and ethical management practices and corporate performance. We tested whether the two constructs fit for the sample companies of Korea and assessed their reliability and validity. Furthermore, we formulated the companies’ action variables using the degree of implementation of customization and process innovation strategy and checked if those two variables had discriminative effects on the relationship. For that purpose, we divided the sample into two groups—high and low—based on the two variables and compared the regression results. The results of this study suggest that both environmental and ethical management practices have a positive effect on corporate performance. Further analyses revealed that the results representing fitness between the two practices and corporate performance favored the group that showed a lower degree of customization strategy. Thus, we inferred that companies that adopt a customization rather than a standardization approach experience a more positive relationship between environmental and ethical practices and corporate performance. Finally, the results comparing the relationship between the two practices and corporate performance revealed a better fit for the group that did more to implement process innovation than for the group with lower implementation, indicating that companies implementing process innovation can anticipate a more positive relationship between environmental and ethical practices and corporate performance.