IDEAS home Printed from https://ideas.repec.org/a/bla/bstrat/v33y2024i5p4086-4107.html
   My bibliography  Save this article

Determinants of firms' initiative and inertia in pursuing climate neutrality strategies—Theoretical explanations and empirical evidence

Author

Listed:
  • Benedikt Unger
  • Michael Nippa

Abstract

In view of global warming and growing demands that economies, industries, and firms should be climate‐neutral by mid‐century, various sources complain that firms are still hesitant to implement a corresponding climate neutrality strategy (CNS). To date, however, there is little empirical evidence or explanation for such an alleged inertia. This study fills this void by analyzing key determinants that may explain whether a CNS is pursued at the firm level. We develop and test hypotheses grounded in theory using firm‐level data from the 2021 European Flash Eurobarometer as well as country‐level datasets to examine the impact of formal and informal institutions. Our results reveal that the majority of firms across many countries and industries have no explicit CNS. As predicted by institutional logics, the extent of a firm's home country's exposure to climate change, climate problem awareness, and regulatory enforcement has a significant positive impact on the likelihood of CNS being formulated and pursued by firms. Extending traditional structural inertia theory, internal factors cause large and old firms to be more likely to report having explicit CNS. We further find that these structural characteristics partially moderate the link between institutions and CNS. After a thorough discussion of the results, potential limitations, research opportunities, and implications for various stakeholders are highlighted.

Suggested Citation

  • Benedikt Unger & Michael Nippa, 2024. "Determinants of firms' initiative and inertia in pursuing climate neutrality strategies—Theoretical explanations and empirical evidence," Business Strategy and the Environment, Wiley Blackwell, vol. 33(5), pages 4086-4107, July.
    • Handle: RePEc:bla:bstrat:v:33:y:2024:i:5:p:4086-4107
    DOI: 10.1002/bse.3698
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/bse.3698
    Download Restriction: no
    File URL: https://libkey.io/10.1002/bse.3698?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Jacob Hörisch & Isabell Wulfsberg & Stefan Schaltegger, 2020. "The influence of feedback and awareness of consequences on the development of corporate sustainability action over time," Business Strategy and the Environment, Wiley Blackwell, vol. 29(2), pages 638-650, February.
    2. Grigoris Giannarakis & Eleni Zafeiriou & Nikolaos Sariannidis, 2017. "The Impact of Carbon Performance on Climate Change Disclosure," Business Strategy and the Environment, Wiley Blackwell, vol. 26(8), pages 1078-1094, December.
    3. Christopher Marquis & Michael W. Toffel & Yanhua Zhou, 2016. "Scrutiny, Norms, and Selective Disclosure: A Global Study of Greenwashing," Organization Science, INFORMS, vol. 27(2), pages 483-504, April.
    4. Paul Elkins & Terry Baker, 2001. "Carbon Taxes and Carbon Emissions Trading," Journal of Economic Surveys, Wiley Blackwell, vol. 15(3), pages 325-376, July.
    5. Alan M. Rugman & Alain Verbeke, 2005. "Corporate Strategy and International Environmental Policy," Chapters, in: Analysis of Multinational Strategic Management, chapter 17, pages 286-300, Edward Elgar Publishing.
    6. Stephen Brammer & Stephen Pavelin, 2008. "Factors influencing the quality of corporate environmental disclosure," Business Strategy and the Environment, Wiley Blackwell, vol. 17(2), pages 120-136, February.
    7. Jo Thori Lind & Halvor Mehlum, 2010. "With or Without U? The Appropriate Test for a U‐Shaped Relationship," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 72(1), pages 109-118, February.
    8. Kling, Gerhard & Volz, Ulrich & Murinde, Victor & Ayas, Sibel, 2021. "The impact of climate vulnerability on firms’ cost of capital and access to finance," World Development, Elsevier, vol. 137(C).
    9. Beirne, John & Renzhi, Nuobu & Volz, Ulrich, 2021. "Feeling the heat: Climate risks and the cost of sovereign borrowing," International Review of Economics & Finance, Elsevier, vol. 76(C), pages 920-936.
    10. Millot, Ariane & Maïzi, Nadia, 2021. "From open-loop energy revolutions to closed-loop transition: What drives carbon neutrality?," Technological Forecasting and Social Change, Elsevier, vol. 172(C).
    11. Richard F. J. Haans & Constant Pieters & Zi-Lin He, 2016. "Thinking about U: Theorizing and testing U- and inverted U-shaped relationships in strategy research," Strategic Management Journal, Wiley Blackwell, vol. 37(7), pages 1177-1195, July.
    12. Michael Nippa & Sanjay Patnaik & Markus Taussig, 2021. "MNE responses to carbon pricing regulations: Theory and evidence," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 52(5), pages 904-929, July.
    13. Christine Oliver, 1997. "Sustainable competitive advantage: combining institutional and resource‐based views," Strategic Management Journal, Wiley Blackwell, vol. 18(9), pages 697-713, October.
    14. Barbara Kump, 2021. "When do threats mobilize managers for organizational change toward sustainability? An environmental belief model," Business Strategy and the Environment, Wiley Blackwell, vol. 30(5), pages 2713-2726, July.
    15. Magali Delmas & Michael W. Toffel, 2004. "Stakeholders and environmental management practices: an institutional framework," Business Strategy and the Environment, Wiley Blackwell, vol. 13(4), pages 209-222, July.
    16. Christopher Gresov & Heather A. Haveman & Terence A. Oliva, 1993. "Organizational Design, Inertia and the Dynamics of Competitive Response," Organization Science, INFORMS, vol. 4(2), pages 181-208, May.
    17. Kolk, Ans & Levy, David, 2001. "Winds of Change:: Corporate Strategy, Climate change and Oil Multinationals," European Management Journal, Elsevier, vol. 19(5), pages 501-509, October.
    18. Regina Scheyvens & Glenn Banks & Emma Hughes, 2016. "The Private Sector and the SDGs: The Need to Move Beyond ‘Business as Usual’," Sustainable Development, John Wiley & Sons, Ltd., vol. 24(6), pages 371-382, November.
    19. Niccolò Maria Todaro & Francesco Testa & Tiberio Daddi & Fabio Iraldo, 2021. "The influence of managers' awareness of climate change, perceived climate risk exposure and risk tolerance on the adoption of corporate responses to climate change," Business Strategy and the Environment, Wiley Blackwell, vol. 30(2), pages 1232-1248, February.
    20. Matthias Damert & Rupert J. Baumgartner, 2018. "External Pressures or Internal Governance – What Determines the Extent of Corporate Responses to Climate Change?," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 25(4), pages 473-488, July.
    21. Aldrich Howard E. & Yang Tiantian, 2012. "What Did Stinchcombe Really Mean? Designing Research to Test the Liability of Newness among New Ventures," Entrepreneurship Research Journal, De Gruyter, vol. 2(3), pages 1-14, July.
    22. Jorge Rivera & Viviane Clement, 2019. "Business adaptation to climate change: American ski resorts and warmer temperatures," Business Strategy and the Environment, Wiley Blackwell, vol. 28(7), pages 1285-1301, November.
    23. Pratima Bansal, 2005. "Evolving sustainably: a longitudinal study of corporate sustainable development," Strategic Management Journal, Wiley Blackwell, vol. 26(3), pages 197-218, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. White, George O. & Rajwani, Tazeeb & Krammer, Sorin M.S., 2022. "Legal distance and entrepreneurial orientation of foreign subsidiaries: Evidence from Southeast Asia," Journal of World Business, Elsevier, vol. 57(6).
    2. Yusheng Kong & Fahad Javed & Jahanzaib Sultan & Muhammad Shehzad Hanif & Noheed Khan, 2022. "EMA Implementation and Corporate Environmental Firm Performance: A Comparison of Institutional Pressures and Environmental Uncertainty," Sustainability, MDPI, vol. 14(9), pages 1-25, May.
    3. Thomas A. Tsalis & Kyveli E. Malamateniou & Dimitrios Koulouriotis & Ioannis E. Nikolaou, 2020. "New challenges for corporate sustainability reporting: United Nations' 2030 Agenda for sustainable development and the sustainable development goals," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(4), pages 1617-1629, July.
    4. Md Mosharraf Hossain & Lafang Wang & Jing Yu, 2024. "The reputational costs of corporate environmental underperformance: evidence from China," Business Strategy and the Environment, Wiley Blackwell, vol. 33(2), pages 930-948, February.
    5. Corinna Dögl & Michael Behnam, 2015. "Environmentally Sustainable Development through Stakeholder Engagement in Developed and Emerging Countries," Business Strategy and the Environment, Wiley Blackwell, vol. 24(6), pages 583-600, September.
    6. Busch, Timo, 2011. "Organizational adaptation to disruptions in the natural environment: The case of climate change," Scandinavian Journal of Management, Elsevier, vol. 27(4), pages 389-404.
    7. Scott R. Colwell & Ashwin W. Joshi, 2013. "Corporate Ecological Responsiveness: Antecedent Effects of Institutional Pressure and Top Management Commitment and Their Impact on Organizational Performance," Business Strategy and the Environment, Wiley Blackwell, vol. 22(2), pages 73-91, February.
    8. Michael Nippa & Sanjay Patnaik & Markus Taussig, 2021. "MNE responses to carbon pricing regulations: Theory and evidence," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 52(5), pages 904-929, July.
    9. Javier Aguilera-Caracuel & Juan Aragón-Correa & Nuria Hurtado-Torres & Alan Rugman, 2012. "The Effects of Institutional Distance and Headquarters’ Financial Performance on the Generation of Environmental Standards in Multinational Companies," Journal of Business Ethics, Springer, vol. 105(4), pages 461-474, February.
    10. Shanyong Wang & Hualong Wang & Jing Wang, 2019. "Exploring the effects of institutional pressures on the implementation of environmental management accounting: Do top management support and perceived benefit work?," Business Strategy and the Environment, Wiley Blackwell, vol. 28(1), pages 233-243, January.
    11. Giuliana Birindelli & Graziella Bonanno & Stefano Dell'Atti & Antonia Patrizia Iannuzzi, 2022. "Climate change commitment, credit risk and the country's environmental performance: Empirical evidence from a sample of international banks," Business Strategy and the Environment, Wiley Blackwell, vol. 31(4), pages 1641-1655, May.
    12. Haiying Lin & Nicole Darnall, 2015. "Strategic Alliance Formation and Structural Configuration," Journal of Business Ethics, Springer, vol. 127(3), pages 549-564, March.
    13. Ren, Shenggang & He, Duojun & Yan, Ji & Zeng, Huixiang & Tan, Justin, 2022. "Environmental labeling certification and corporate environmental innovation: The moderating role of corporate ownership and local government intervention," Journal of Business Research, Elsevier, vol. 140(C), pages 556-571.
    14. David G Hyatt & Nicholas Berente, 2017. "Substantive or Symbolic Environmental Strategies? Effects of External and Internal Normative Stakeholder Pressures," Business Strategy and the Environment, Wiley Blackwell, vol. 26(8), pages 1212-1234, December.
    15. Julia Hartmann & Stephan Vachon, 2018. "Linking Environmental Management to Environmental Performance: The Interactive Role of Industry Context," Business Strategy and the Environment, Wiley Blackwell, vol. 27(3), pages 359-374, March.
    16. Bárbara Galleli & Elder Semprebon & Joyce Aparecida Ramos dos Santos & Noah Emanuel Brito Teles & Mateus Santos de Freitas-Martins & Raquel Teodoro da Silva Onevetch, 2021. "Institutional Pressures, Sustainable Development Goals and COVID-19: How Are Organisations Engaging?," Sustainability, MDPI, vol. 13(21), pages 1-21, November.
    17. Aseem Kaul & Jiao Luo, 2018. "An economic case for CSR: The comparative efficiency of for‐profit firms in meeting consumer demand for social goods," Strategic Management Journal, Wiley Blackwell, vol. 39(6), pages 1650-1677, June.
    18. Ye, Silin & Zhou, Jing & Jiang, Yunwen & Liu, Xiaming, 2023. "Managers as the bridge: How cultural friction influences the integration of cross-border mergers and acquisitions," International Business Review, Elsevier, vol. 32(4).
    19. Xiaodong Teng & Kun-Shan Wu & Lopin Kuo & Bao-Guang Chang, 2023. "Investigating the double-edged sword effect of environmental, social and governance practices on corporate risk-taking in the high-tech industry," Oeconomia Copernicana, Institute of Economic Research, vol. 14(2), pages 511-549, June.
    20. Zhou, Dan & Yan, Tingting & Zhao, Lilong & Guo, Jingjing, 2020. "Performance implications of servitization: Does a Manufacturer's service supply network matter?," International Journal of Production Economics, Elsevier, vol. 219(C), pages 31-42.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:bstrat:v:33:y:2024:i:5:p:4086-4107. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1099-0836 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.