Too little or too much of good things? The horizontal S-curve hypothesis of green business strategy on firm performance

Abstract

Building on the tenets of the combination of institutional and resource-based views, this study aims to shed light on how a firm could benefit from implementing a strategic stance toward exploiting green-related opportunities. Our model integrates ‘too-much-of-a-good-thing’ (TMGT) and ‘too-little-of-a-good-thing’ (TLGT) effects to formulate green business strategy and how this, in turn, influences substantive performance. The association is empirically manifested in a horizontal S-curve, which at first shows that firm performance declines with initially going green, follows by a positive relationship between increasing green business strategy and firm performance, then declines at very high levels of green pursuit. Additionally, the S-curve relationship between green business strategy and firm performance is positively moderated by internal absorptive capacity and external public environmental concern. These findings offer relevant information for a finer-grained interpretation of how and when it pays to be green.