Abstract
This paper focuses on efficiency gains that voluntary environmental initiatives may achieve within the firm. Current debate concerning the extent and significance of inefficiencies within firms is critically important to the progress of energy and environmental policies. Several recent lines of inquiry in microeconomics help explain the persistence of inefficiencies within firms. In addition, two of the most prominent new approaches in the field of business strategy — resource-based strategy and the “capabilities perspective” — focus on the heterogeneity among firms and the resulting pockets of inefficiency within firms. They suggest at least three generic strategies for voluntary environmental initiatives — challenging outdated organizational routines, creating opportunities for differentiation, or complementing firms' resource investment trajectories. These generic approaches suggest that there is considerable scope for further experimentation with voluntary environmental initiatives.
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