Stakeholder influences on the design of firms’ environmental practices

Abstract

While prior literature has emphasized that stakeholders can influence a firm's decision to adopt environmental practices that lead to competitive advantage, most scholarship has assumed that stakeholders influence the design of firms' environmental practices similarly. We challenge this notion and suggest that stakeholders affect not only the decision to adopt environmental practices, but also managerial decisions about the design of these practices. We consider the case of firms' strategic decisions about the design of their environmental practices, and in particular their degree of comprehensiveness and visibility. We then develop a classification of four design strategies: movers and shakers, backroom operators, wannabes, and passivists. Using multinomial regression techniques for a sample of more than 1700 firms worldwide, our research shows that while stakeholders exert pressures on firms, managers' perceptions of these pressures vary, and these variations appear to influence the design of their environmental practices. These findings offer important evidence that the scope of stakeholders' influence appears more far reaching (and nuanced) than previously considered. Managers who respond to these influences may therefore be in a better position to satisfy stakeholder expectations, thus enhancing their organization's overall credibility.