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Exploring the differential impact of environmental sustainability, operational efficiency, and corporate reputation on market valuation in high-tech-oriented firms

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  • Kwon, He-Boong
  • Lee, Jooh

Abstract

In this paper, we explore the strategic significance of three factors – operational efficiency, measured by data envelope analysis; environmental sustainability, represented by Newsweek's Green Rankings; and corporate reputation, based on Fortune's list of most admired companies in the world –and their relationship to the market valuation of high-tech-oriented companies. In particular, we estimate the impact of these factors on Tobin's Q, which represents the overall technological and market strength of a firm as a forward-looking market performance reflecting stakeholders' expectations of the value of a firm. Using complementary regression and a neural network approach, we find that operational efficiency has the largest impact on Tobin's Q, followed by corporate reputation and environmental sustainability. In addition to its findings on the relative importance of these strategic factors, the paper's findings also suggest that operational efficiency, which reflects efficiency-driven best practice and managerial proficiency, is a crucial determinant of the market-facing measure of Tobin's Q in high-tech industries. Using models to estimate the interaction between these variables, we find that environmental sustainability and its interaction with reputation has the largest synergistic effect on Tobin's Q, followed by the interaction of reputation and operational efficiency. Our results show that the interaction of unique performance metrics can provide insights that differ from those derived from models for which the interaction is not included. Furthermore, the discovery of varying impact patterns under distinguishable capabilities is another significant finding of the paper.

Suggested Citation

  • Kwon, He-Boong & Lee, Jooh, 2019. "Exploring the differential impact of environmental sustainability, operational efficiency, and corporate reputation on market valuation in high-tech-oriented firms," International Journal of Production Economics, Elsevier, vol. 211(C), pages 1-14.
    • Handle: RePEc:eee:proeco:v:211:y:2019:i:c:p:1-14
    DOI: 10.1016/j.ijpe.2019.01.034
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