Managing Eco-Friendly Strategy Implementation and Its Impacts on Business Performance: The Role of Organizational Strategic Capabilities

Abstract

The increasing movements on the implementation of environmental sustainability and its impact on business performance become one of the important discussions on the strategic management field. Organizations are forced to major environmental initiatives to answer the green business inquiries. Constructed from the organizational capabilities literature of strategic management, this study explains how organizations strengthen their performances toward the implementation of environmentaly friendly or also called as ecofriendly business strategy and proposes hypotheses to answer the questions on how the organizational capabilities that represents internal organizational factors affect business performance through the mediating effect of eco-friendly strategy implementation Using a model integrating resource-based theory, institutional theory, and strategic business unit perspectives, this study tests the causalities upon the hotel industry in Indonesia which currently facing the force to adopt environmental friendly business practices due to the expansive development within the industry. This study used SPSS software followed by mediation test to analyze the mediating effect of eco-friendly strategy implementation on the relationship between organizational strategic capabilities and business performance. Research data were collected through the questionnaires, resulting 109 data from two-starred and above hotels across major cities in Indonesia. The findings of this study indicate that organizational strategic capabilities have a positive and significant effect on eco-friendly strategy implementation and business performances respectively while the mediating effect of Eco-friendly strategy implementation were partially found.Drawing from these results, the implications of the findings upon industrial, policies, and further research avenues are discussed.