Abstract
Despite the significant increase in interest in sustainable business practices, decisions on switching to more environmentally friendly input materials are understudied. In a conjoint experiment, we presented 267 Finnish manufacturing firms with an opportunity to acquire an alternative, more ecological input material and investigated their willingness to switch to that material. We find that in general, firms are willing to substitute their current principal input with a more ecological alternative under conditions of functional parity. However, such willingness is contingent on the firm’s value creation structures. Specifically, if the products and processes driving the firm’s value creation rely more on tangible materials (high materiality), firms anticipate higher input-switching costs, which leads to inertia and slows the adoption of alternative, environmentally friendlier inputs. However, if a firm’s value creation is driven more by intangible assets, like intellectual property and amortizable development costs, input-switching costs appear lower. Such firms not only find it easier to adopt ecological inputs but may also derive greater benefit from leveraging the positive reputation effects associated with ecological improvements. By exploring how willingness to switch to an alternative input material is constrained by organizational structures, our findings contribute to research on input substitution and theories of external influence, like demand-side research, stakeholder theory, and ecological responsiveness.
Highlights
By exploring how willingness to switch to an alternative input material is constrained by organizational structures, our findings contribute to research on input substitution and theories of external influence like demand-side research, stakeholder theory, and ecological responsiveness
We propose that manufacturing firms have a strong incentive to switch to more environmentally friendly input materials
We explored the understudied what-to-buy decision required of manufacturing firms and found input switching decisions are positively influenced by environmental friendliness
Summary
They are more straightforward to interpret than odds ratios whose scaling makes it difficult to gauge the relative importance of positive (odds ratio higher than 1) and negative (odds ratio less than 1) effects They are well-suited to generalized ordinal regression models because they distill the contribution of a predictor to the dependent variable into a single value in spite of the coefficient (and odds ratio) being estimated separately for each threshold (Luchman, 2014). The percentages for stakeholder pressure, business risk, and cost considerations are 0.08%, 2.2%, and 6.2%, respectively This means that managers with procurement responsibility are most likely to consider switching to an alternative input material if it is cheaper than the current one, which supports the validity of the conjoint experiment.
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