Green Firms Research Articles

Market-based Instruments in a Growth Model with Dirty and Clean Technologies

Abstract Energy use strongly contributes to CO 2 emissions. Since low-carbon technologies help reducing those emissions, attention should be addressed to technological knowledge. Therefore, this paper develops a dynamic general equilibrium growth model with endogenous skill-biased technological change to study the contributions of environmental policies in producing more ecological goods. By solving the transitional dynamics, it is shown that when green firms and green research are supported by policy and/or dirty activities are taxed, technological progress leads to more ecological goods production and environmental quality improvements. Furthermore, a positive change in green environmental quality fosters R&D on ecological goods, increasing their production.

Flash of green: are environmentally driven stock returns sustainable?

Purpose The purpose of this paper is to explore the source of apparent abnormal returns accrued by “green” company stocks. Though one cannot completely rule out that market-to-book and size factors may already capture the information of Trucosts’ total damage measure, the authors attempt to attribute the effect to risk, a persistent desirable characteristic or a short-run attention effect. Design/methodology/approach The authors construct portfolios of stocks using the Trucost data for identifying more environmentally friendly companies. The authors then compare the risk-adjusted returns of the green portfolios to the non-green portfolios. A secondary analysis of the price impact of being listed on the Newsweek green company listed is used to determine attention effects. Findings The authors find that green stock returns outperform the most polluting stocks by 3.7 percent per year on a risk-adjusted basis. The evidence is most consistent with a significant but economically small attention effect coupled with a longer lasting and greater magnitude desirable characteristic driving green returns. The authors do not find evidence of a risk-contribution to the performance after controlling for well-known factors. Practical implications Fund managers may benefit from this research in selecting green stocks, and thereby enhancing investment performance, with desirable characteristics without fear of increasing risk. Social implications One social implication is that investing in sustainable and green firms may not only be beneficial for the common good but also for the investor. Increased capital flows, and hence lower borrowing costs, for green firms may assist in creating a more ecologically sustainable economy. Originality/value To the authors’ knowledge this paper unique in attempting to determine if the green premium is a short-run inefficiency resolved by attention or a result of a desirable characteristic.

How Does News Impact on the Stock Prices of Green Firms in Emerging Markets?

Firms around the globe have enhanced their green credentials as a means of increasing competitiveness and improving firm performance. The literature on firms and news suggests that stock prices of most firms tends to be very responsive to news items in the short-term. However, many green companies make investments or are working in industries where the payoffs are likely to be obtained more in the medium-term. There is therefore good reason to believe that the stock prices of these firms would be less responsive to daily news items. Using a database of green firms in emerging markets, the study finds that news can impact on daily returns of green companies. However, the effects of this news does not seem to be long-lasting and was not observed across the majority of firms considered.

The Politics of Land Use for Distributed Renewable Energy Generation

Many studies on energy generation have focused on large-scale systems. But as the search for alternative sources of clean energy becomes imperative, there is the need to examine how local governments leverage their authority on land use to permit small-scale energy facilities. This study examines various factors shaping policy adoption on distributed renewable energy generation through the lens of transaction-cost politics. It deviates from existing land-use perspectives, which usually highlight competition between traditional land-use forces to capture the gains from policy. Policy adoption here implies that actors in their exchanges have been able to identify and reduce the transaction costs that would otherwise have prevented citizens from harvesting renewable energy at their place of residence. These actors minimize transaction costs by making use of the transaction resources available to them in the political market. These resources could ease barriers to political contracting and enable actors to shape policy. They include green firms, network memberships, dedicated staff for the sustainability effort, forms of government, and educated populace, which the study found significant in shaping the adoption of zoning codes that permit distributed renewable energy generation.

Beyond the question “Does it pay to be green?”: How much green? and when?

This research investigates the relationship between green management and performance in Italian firms. The analysis compares innovation and productivity of firms with similar features but different environmental activities. Firms are matched on a rich set of covariates extending the Coarsened Exact Matching to survey data. Matched data are analysed with parametric and non-parametric tests and endogenous treatment regression. The analysis shows that the relationship between green management and performance is U-shaped. Green firms are performing no better than firms with no environmental activity, especially in energy intensive sectors. Among green firms, more advanced environmental management is associated with higher performance. Overall, the results suggest that green management has strong sectoral patterns and no linear relationship with performance. Findings suggest that green managers should pursue a comprehensive environmental management system. Sectoral-specific policies to promote environmentally friendly activities are needed when green activities are not paying off.

Sell to whom? Firm’s green production in competition facing market segmentation

When substantial numbers of consumers claim to be “green”, firms face the choice of whether to develop green products which are more environmental than their traditional counterparts. In many cases, consumers may differ in their willingness-to-pay for the green products that firms should determine which segment to sell the green products to. This paper examines the role of costs, consumer’s green segmentation, and competition in firm’s green production decisions. We find that the cost conditions for green production is relaxed in competition cases compared with the monopolist case. Under competition, the traditional firm would possibly to defend his market share via decreasing the traditional product’s price, which leading to an equilibrium that green products are sold to green segment solely. And we show that in some cases, both traditional and green firms can benefit from a large green segment ratio and consumer’s premium differentiation.Big data contains huge value through which we can better understand consumers. Based on big data technologies development, consumers can be accurate segmented with improved indexes of green premium and segment ratio, thus these conclusions can provide guidance to green production in practice.

Enviropreneurial marketing in greening corporate activities

PurposeThe purpose of this study is to explore the enviropreneurial marketing approach used by firms in China and its impact on the success of green marketing actions, with the aim of drawing useful lessons from the literature and successful green firms.Design/methodology/approachThis study follows the inductive case study approach, and the qualitative data come from a study of four firms engaging in enviropreneurial marketing activities. Interview data were triangulated with qualitative data from other sources.FindingsThe evidence from this study indicates that enviropreneurial marketing plays a central role in developing innovative product or services, adopting an innovative and pragmatic green marketing mix that differentiates and creates changes within industry and markets.Research limitations/implicationsThe main limitation of this study is that data samples are from successful firms labelled as “green” by the Chinese authorities, based on winning “official” awards. These do not necessarily represent the opinions of a cross section of firms within China with respect to enviropreneurial marketing. Future studies should include a mixed population of firms.Practical implicationsPolicy makers and marketing practitioners need to consider drivers to ensure that Chinese firms integrate enviropreneurial marketing activities, which need to complement the delivery of functional value.Social implicationsGreen initiatives/changes within the firm seem to be partly driven by the environmental orientation of these firms’ founders, thus, developing an environmental orientation in managers may be important to drive enviropreneurial marketing activities.Originality/valueThis study contributes by confirming the current literature on green marketing and examining the positive impact of enviropreneurial marketing on firms’ performance in the context of marketing in emerging markets.

The determinants of location choice

Purpose– The purpose of this paper is to analyze the role of institutional distance and host country attractiveness in location determinants of Chinese Foreign investments in EU in the renewable energy sector, taking into account bilateral political and economic relations.Design/methodology/approach– A firm-level Ministry of Commerce (MofCom) database of greenfield and non-greenfield Chinese investments abroad is used. A six fixed-effects logit analysis is performed.Findings– Chinese firms tend to invest in EU countries with reduced rule of law; market affluence is an attraction factor for them, but they do not seem to be human capital asset-seekers. Countries with politically stable environment are most attractive to sales/services subsidiaries; while countries with good control of corruption, low trade barriers and encouraging foreign ownership are most attractive to manufacturing subsidiaries. A large market is the most attractive factor for R & D subsidiaries, and a rich market is the most attractive factor for manufacturing subsidiaries. Manufacturing subsidiaries are more technological asset-seekers. R & D subsidiaries are the most non-human capital asset-seekers.Research limitations/implications– The study extends the state of the art of the literature by developing a theoretical framework, grounded on the influence of host country institutional factors and on endowment of resources on the location choice of Chinese investors. Further variables should be included in the future (industrial specialization of host country, cultural distance, bilateral ties).Practical implications– Policy implications are relevant. They are related both to outward foreign direct investment attraction policies and to Europe-China cooperation dialogue. With reference to attraction policies, as Chinese green firms are technological asset-seekers, more than human capital asset-seekers, EU countries interested in partnering with Chinese investors should develop specific measures targeting encouraging technology spillover. Even R & D subsidiaries should be tempted with technology-oriented measures. With reference to Europe-China cooperation, the paper findings support suggestions for a more active European position on foreign investments in key European energy sectors.Originality/value– The paper is grounded on an improved theoretical model, tested through a unique Mofcom firm-level database. Originality lies in the fact that the authors provide a sectoral insight. The need for sectoral analysis is fundamental as Chinese industrial development and internationalization path vary extensively across industry, due to policy interventions, supportive measures and prioritized initiatives. Zhanget al.(2011, p. 229) found that – specifically – the energy sector is highly sensitive to host country institutional context, therefore Chinese foreign direct investment are more likely to be exposed to regulatory and competitive pressure compared to other industries.

The Impact of Technology on Labor Makeup: A Study of the Green Industry

Green industry is in a state of rapid change and turmoil as it reacts to the 2008 financial crisis and its arrival at maturity. In an effort to survive this challenging period, many firms are using new technologies, ranging from basic e-mail and accounting software to sophisticated digital imaging systems for identifying diseases. However, there has been a noteworthy lack of research into the way that technology adoption impacts labor in this industry. This paper uses propensity score matching (PSM) to identify the impact that various technologies have on the number of full- and part-time employees as well as the portion of full-time laborers that green firms employ. We find that none of the technologies studied had a significant impact on the percentage of full-time workers employed by green industry firms, but there were some effects when examining full-time, part-time, and total number of workers.

Tourism firms’ environmental rankings and financial performance: a multidimensional scaling approach

The relationship between firms' environmental initiatives and financial performance continues to generate considerable interest. Despite the progress made in the study of this relationship, there is a paucity of research addressing tourism sector firms’ simultaneous environmental and financial performance. This research sheds light on the link between tourism-related firms’ environmental and financial performance. Results indicate that firms that performed well financially ranked higher on environmental initiatives. This suggests that firms’ financial performance may influence environmental performance since firms with good financial performance are better able to allocate more resources to support environmental initiatives. However, since investments in environmental initiatives require financial and manpower resources, firms should only invest in such initiatives if resources are not diverted from core functions, since such actions could affect overall firm viability. Results also indicated that firms that have adopted green initiatives can be classified into four clearly defined categories: progressive firms, which includes firms that simultaneously excel on green initiatives and financial performance; repressive firms or those that perform poorly on both; aggressive firms or those that perform admirably financially but poorly on environmental initiatives; and green firms or firms that perform admirably on green initiatives but poorly financially.

An experiment on energy-saving competition with socially responsible consumers: Opening the black box

We present results from experimental price-setting oligopolies in which green firms undertake different levels of energy-saving investments motivated by public subsidies and demand-side advantages. We find that consumers reveal higher willingness to pay for greener sellers’ products. This observation, in conjunction to the fact that greener sellers set higher prices, is compatible with the use and interpretation of energy-saving behaviour as a differentiation strategy. However, sellers do not exploit the resulting advantage through sufficiently high price-cost margins, because they seem trapped into “run to stay still” competition. Regarding the use of public subsidies to energy-saving sellers we uncover an undesirable crowding-out effect of consumers’ intrinsic tendency to support green manufacturers. Namely, consumers may be less willing to support a green seller whose energy-saving strategy yields a direct financial benefit. Finally, we disentangle two alternative motivations for consumer's attractions to pro-social firms; first, the self-interested recognition of the firm's contribution to the public and private welfare and, second, the need to compensate a firm for the cost entailed in each pro-social action. Our results show the prevalence of the former over the latter.

Ecolabels, uncertified abatement, and the sustainability of natural resources: an evolutionary approach

This study presents an evolutionary model where firms decide their environmental strategy, which may include certification of voluntary abatement by joining an eco-label, in settings where conservation outcomes exert an influence on the price premia that certified and uncertified green firms receive. Findings support that either certified or uncertified voluntary abatement can be sustained in the long run as a result of market incentives, but not simultaneously. When certified abatement takes place in the long-run, it results in an improvement in the state of the natural capital as compared to situations where abatement is not certified. However, certification practices that are not attractive enough for companies to subsist in equilibrium can generate transitional dynamics eroding conservation outcomes. Moreover, given the endogenous nature of environmental conservation on firms’ abatement decisions, temporary policies increasing the state of the environment can change the long-term incentive structure of the system favoring certification of abatement. A context of applicability of the model is illustrated by tourism uses of natural resources.

Corporate Governance and Green IT Investments: Analysis Based Upon the Korean Corporate Governance Index (KCGI)

Green IT aims to focus on the energy efficiency of an equipment while enabling low power consumption of the server, indirect energy saving and power loss management, IT recycling, and IT industry greening process or product without destroying the environment and by promoting the sustainable maintenance of IT by leveraging IT to contribute eco-friendly conservation. Infra expansion of IT infrastructure for today's efforts and achievements in an environmental management that takes care of smart grid’s recent academic and practical aspects of energy saving as regards Corporate Social Responsibility (CSR) is provoking interest among Green IT firms in the interest of domestic and global investment (e.g., LG U +, LG CNS, KT...). However, Green IT success factors upon performance analysis are of poor state. In this study, the positive results are expected to identify the determinants of investment in Green IT. Corporate governance and firm value should be drawn based on the key elements that could be identified through this study. Therefore, green governance of investment firms and investment firm value in the Green IT industry must expand. Governance, profitability, and scale should improve in terms of investment firms and Green IT. An increased investment in firm value due to positive performance could be confirmed empirically.

Competition Among Coalitions in a Cournot Industry: A Validation of the Porter Hypothesis

We determine the emergence of the Porter Hypothesis in a large oligopoly setting where the industry-wide adoption of green technologies is endogenously determined as a result of competition among coalitions. We examine a setting where the initial technology is polluting, firms decide whether to be brown or green and compete in quantities. We find that the Porter hypothesis may emerge as a market configuration with all green firms spurred by environmental regulation, even if consumers are not environmentally concerned. Finally, we single out the necessary and sufficient conditions under which the green grand coalition is socially optimal and therefore yields a win-win outcome.

How green firms appeal users with pop-ups and inline ads as an effective tool to distort their attitude

The internet industry makes a distinction between rich media pop-ups and inline ads marketing to offer great opportunities for green advertising and marketing activities supported by website advertising to allow green firms to directly convey messages to the consumers. This integration is a significant base for e-marketing. The service companies in Taiwan have adopted various e-marketing techniques like pop-up and inline advertisements. Pop-up advertisements are seen in high-traffic websites. Since there is an increase of environmental concern for consumers and the government of Taiwan, it is of great significance for advertisers to understand the precise differences between general advertising and green advertising by employing pop-up and inline advertisements and how to approach the two differently to achieve the desired effect. This research paper is an attempt to study the effectiveness of pop-ups and inline advertisements among Taiwanese online consumers.

Green economy in China: Regional variations and policy drivers

For policy makers in China, the development of a green economy presents opportunities and challenges not only for the central government, but also for provincial and city governments. This study measures clean energy economy at the city level in China, by counting green jobs and firms through an analytical approach. As shown in this study, green jobs and green firms are distributed unevenly across different regions in China. This study also quantifies provincial clean energy policies in China and finds significant variations in clean energy policy actions. Spatial error model (SEM) analyses indicate that local clean energy policies, along with socio-economic factors such as population, per capita gross domestic product, educational attainment, emissions of sulfur dioxide, and marketization of the regional economy, explain the variation in green economy across cities. Cities located in a province with clean energy policies have 54.3% more green jobs and 61.8% more green businesses, compared with cities located in a province without such policies.

Corporate communication, sustainability, and social media: It's not easy (really) being green

This empirical research explores how 16 global corporations from four different industry sectors—retail, technology equipment, food/beverage/tobacco, and consumer goods—use social media platforms and corporate social responsibility (CSR) reports to communicate about sustainability. Facebook, Twitter, CEO letters from annual reports and CSR/sustainability reports, and other company documentation are examined to compare the content and scope of these firms’ corporate communication. The sample is divided into two subsamples (Green and Not Green firms) using Newsweek's Greenest Company 2012 rankings, and compared for differential use of social media and corporate reports. Results show that communication varies across firm and industry regarding types of sustainability initiatives reported, metrics employed, and communication media utilized, and that Green firms are more active than Not Green firms both in addressing sustainability and in general social media activity. Implications are discussed herein and recommendations are presented for companies seeking to better understand the effective use of social media and sustainability communication.

Environmental Innovations and Internationalization: Theory and Practices

AbstractBased on original data on Italian firms specializing in medium‐ and low‐tech industries, we study the relationship between firms’ upstream and downstream internationalization and their propensity to introduce products or processes that reduce environmental impact. Preliminary evidence suggests that geography plays an important role in green firms’ activities and supply chains. More precisely, results suggest that firms that outsource to and rely on non‐local suppliers are less likely to engage in environmental innovations. Moreover, we verify that firms engaged in export activities play a similar and negative role, regardless of the export intensity and typology of foreign markets (i.e. developed versus emerging). Tapping global flows of knowledge by being a part of a multinational group positively spurs the development of green innovations, as for FDIs. Copyright © 2014 John Wiley & Sons, Ltd and ERP Environment

A Study on Sustainability and Management Characteristics of Green Management Firms

A Study on Sustainability and Management Characteristics of Green Management Firms

Pricing and quality decisions and financial incentives for sustainable product design with recycled material content under price leadership

Design for recycling has been promoted by companies and governments around the world as one of the most important practices for achieving sustainability. The success or failure of such a practice, however, depends heavily on the financial incentives for firms to design products with more recycled or recyclable material contents. An interesting phenomenon that can be observed in many markets with products made predominately from either virgin or recycled materials is the existence of price leadership. In this paper, we utilize an interdisciplinary approach with both theoretical and empirical analyses to study the pricing and design decisions for products with virgin and recycled material contents in a duopoly market consisting of both the environmentally conscious (green) and non-environmentally conscious (brown) consumers under price leadership. Our analytical results show that the brown segment's efficient quality provides an “anchor product position” for the price leader regardless of whether the price leader is a brown or green firm. The price follower's financial incentive for becoming a green or brown firm will then lead to different cases of price leadership with very different environmental consequences. Specifically, the arrangement where the brown and green firms are the price leader and follower, respectively, leads to more environmentally friendly design decisions than those under the other arrangement where the duopolists switch their pricing roles. In addition, we conduct an empirical analysis to explore the specific types of price leadership in the markets of aluminum, cardboards, and PET. Based on the equilibrium pricing and quality decisions, we analyze the financial incentives for the more environmentally friendly case of price leadership to be realized, and derive important insights to formulating strategies and policies to implement the practice of design for recycling from the interdisciplinary perspective.