Do formal and informal institutions matter for firm-level strategic environmental actions?

Abstract

We developed an overarching multi-level mediation model using 199 responses from 53 companies from the industrial sector in Jordan to examine (1) the mediation effect of firm-level environmental climate on the relationship between formal regulatory institutions and firm-level strategic environmental actions, and (2) the role that informal institutions conveyed via political, normative, and business connections plays on the environment-related cognitions of top managers. At the ‘within’ level, our results indicate that top managers with strong political connections develop negative environment-related cognitions while those with strong normative and business connections develop positive environment-related cognitions. At the firm-level, our results reveal that firm-level environmental climate – as an aggregated measure of the ‘within’ level environmental cognitions of top managers – fully mediates the relationship between formal regulatory institutions and firm-level strategic environmental actions. This study demonstrates how multilevel research is used to enrich understanding of firm-level strategic environmental actions, with implications beyond Jordan.