Differences in Environmental Management System Adoption among Chinese Business Group Affiliates

Abstract

We investigate differences in environmental management system adoption among business group affiliates in China. We propose a theory suggesting that affiliated firms are either sensitive or resistant to environmental compliance pressures, based on their strategic characteristics. Using a panel dataset of Chinese listed firms observed between 2008 and 2012, we examine a variety of characteristics that affect business group affiliates’ decisions to adopt an environmental management system. We find that certain theoretically deduced factors, such as being affiliated with a family- owned business group and having a business model centered on business- to-consumer markets, increase the sensitivity of affiliated firms to societal pressures that favor the adoption of formal environmental management systems such as ISO 14001. Conversely, other factors, such as being a core member of the business group and being shielded by corporate political connections, appear to make affiliated firms more resistant to environmental compliance pressures. We predict and demonstrate that these factors include. Our study contributes to the literature on business group strategy, strategic corporate environmentalism, and China studies.