The Influence of Regulatory Context on EO, Proactiveness, & Environmental Practice Adoption

Abstract

There is some research promising that entrepreneurial orientation (EO), and in particular its proactiveness dimension, positively influence sustainability decisions in firms, however we know little about how these characteristics more specifically relate to an SME’s choice to adopt environmental practices. Furthermore, research has called for deeper examination into how the external regulatory context influences SMEs’ decisions to adopt environmental practices. Combining tenets of EO, proactiveness, regulatory context, and sustainability, we hypothesize that SMEs higher in proactiveness, relative to risk-taking and innovativeness, will focus their attention on opportunities related to environmental practices that lower costs and increase competitive differentiation. We further propose regulatory pressure positively moderates the relationships between firms’ EO and proactiveness and the adoption of environmental practices, as SMEs high in EO and proactiveness will be motivated to adopt a wider range of environmental practices than those necessary to meet compliance thresholds to achieve and maintain competitive advantage relative to other firms subject to the same regulatory pressure. We test and find support for our hypotheses using wine industry survey data, enriching our understanding of internal and external influences on SMEs’ sustainability strategies and providing new directions for future research.