Political embeddedness and the adoption of environmental management practices: The mediating effects of institutional pressures

We examine the effect of political embeddedness on environmental management practices and identify different channels for this relationship. We find that politically embedded firms are less exposed to coercive pressure, but have higher normative and mimetic pressures to engage in environmental management. Additionally, normative and mimetic pressures are higher for firms operating in a more competitive market, whereas oligopolistic firms are subject to higher coercive pressure. Our findings support both legitimacy theory which argues that political embeddedness shields firms from environmental regulations, as well as control‐based theories arguing that politically embedded firms should perform better in environmental management. We also demonstrate that market‐based incentives are especially important to induce politically embedded firms to adopt environmental practices when regulatory pressure does not work well.