Abstract
A significant amount of research has been conducted on the impacts of emissions reduction, absorptive capacity, and buffer inventory on firm performance. According to the resource-based view (RBV), absorptive capacity and buffer inventory are organizational capabilities and resources to create sustainable competitive advantages. Yet, the resource orchestration perspective (ROP) of the RBV emphasizes that firms need to develop a new capability to orchestrate and deploy their existing capabilities and resources. From an organizational learning perspective, firms with the low-level release of toxic chemicals have established a structured system and systematic organizational routines, strengthening their learning capabilities to share and use internal and external information across functional areas for continuous improvements. This study explores and seeks to understand toxic emissions through systematic operational routines as an organizational mechanism. These routines orchestrate and deploy the firm-specific absorptive capacity and buffer inventory to generate a sustainable competitive advantage. We examine the impacts of the absorptive capacity and buffer inventory on firm value in terms of Tobin’s Q, respectively. We also explore how such impacts are moderated by toxic emissions. Our results show that the absorptive capacity significantly enhances the market value of firms. However, the relationship between the buffer inventory and firm value is insignificant. Our additional analyses indicate that the impacts of the absorptive capacity and buffer inventory on the firm value are both significantly positive when firms release low toxic chemicals. Our results further suggest that firms can maximize their market value with a high absorptive capacity, high buffer inventory, and low toxic emissions.
Highlights
IntroductionManufacturing processes could produce a huge amount of toxic chemicals that would lead to penalties and high restoration costs [3]
Faced with the complex and unpredictable changing environment, firms are interested in developing environmental practices to respond to growing regulatory requirements, variations in customer demands, compliance costs, and risks to a corporate’s reputation [1,2].Manufacturing processes could produce a huge amount of toxic chemicals that would lead to penalties and high restoration costs [3]
This research contributes to the understanding of the impacts of absorptive capacity and buffer inventory on firm value as well as on integrating toxic emissions intensity
Summary
Manufacturing processes could produce a huge amount of toxic chemicals that would lead to penalties and high restoration costs [3]. Toxic emissions intensity in productions and operations is a critical concern to manufacturers [4]. It has drawn massive attention from both researchers and practitioners to investigate how the firm performance is impacted by environmental management e.g., [5,6], as well as the toxic and chemicals emissions, e.g., [7,8]. Previous studies have found a significant positive impact on stock returns from the environmental performance in the manufacturing industries, e.g., [3,9]. Some recent studies, e.g., [10,11,12] have discussed that environment management develops a learning infrastructure in organizations to exploit existing knowledge for renewing and developing a green organizational capability, enabling firms to adapt more readily to the environment
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