dynamic environmental capabilities report on work in progress rachel hilliard, cisc don goldstein,...
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Dynamic Environmental CapabilitiesReport on work in progress
Rachel Hilliard, CISC
Don Goldstein, Allegheny College (USA)
Valerie Parker, CISC
Funded by the Environmental Protection Agency
Research question
• What distinguishes companies able to ‘green’ production competitively?
• Working hypothesis:
strong dynamic organisational capabilities
Regulation and the Porterian Firm
REGULATION INNOVATION
BY FIRMS
‘Firms have numerous avenues for technological improvement and limited attention’
Role for regulation to direct firms to potentially profitable area of innovation
Evolutionary Economics: Regulation and the Firm
REGULATION
ORGANISATIONAL PROCESSES OF KNOWLEDGE/LEARNINGORGANISATIONAL CAPABILITIES
INNOVATION BY FIRMS
• Tests: economic AND environmental performance
• Capabilities evolve in relation to competitive surroundings & survival tests
Requirements of IPC Licensing
• Compliance with EU emissions standards for air and water pollution - BATNEEC
• Rolling programme of environmental projects demonstrating development of cleaner technology solutions over end-of-pipe
• Environmental Management System including development of measures/targets
Research plan
• Link IPC data with financial data
• Add survey data on organisational practices
• Model determinants of environmental & economic performance
Getting there: simultaneous thinking about…
Research question
Model Data
Creating data:Information generated by IPC licensing
IPC Application
Products/processes
Technologies
Key emissions
Environmentalmanagement
Correspondence
EPA audits
Reports of
non compliances
Company response
3rd party complaints
AnnualEnvironmentalReports
Emissions of pollution
Environmental technology projects
Environmental management
Creating data:Financial information from Companies Registration Office
• Economic performance– Operating profitability
• Output proxy– Deflated sales
Creating data:IPC info empirical proxies
• Environmental performance– (Normalised) emissions– Pollution noncompliances
• Direct determinants– Technology practices– Organisational practices
• Complementary organisational capabilities– Static: repetitive response– Dynamic: search, assessment-for-change
Creating data:Defining & measuring capabilities
• Organisational practice– Activity: subject to choice in each period– May directly affect performance that period
• Organisational capability– Capacity to mobilise practices & resources in coordination– Affect performance over time– Affected by periodic practices through fitness screen
• Model as organisational capital investment:– Annual ‘practice’ measure– Cumulative ‘capability’ measure, incremented annually
Creating a model: Two stage (+1) process
• Environmental performance– Function of tech & organisational
practices– Find environmental best practices
(EBPs)
• Economic performance– Function of EBPs– Control company, sector, economy
influences
Given complementary capabilities
• Evolution of organisational capabilities– Degree, sources of time variation?– Differ across static, dynamic
capabilities?
Creating a model:Capabilities as complementary assets
• E.g., stage 2: Economic performance = f(EBPs)
• Panel regression: for company i and year t,
Profitabilityit = f (tech-EBPit , org-EBPit , capabilitiesit , interactionsit ; company controlsit , other controlst ),
where for both tech and org,
interactionsit = EBPit x capabilitiesit
Creating a model:Heterogeneity problem
• ‘Fixed’ (constant), unmeasured company differences affect both performance and independent variables
• Remove effect of different levels, look at changes in independent variables (& effect on performance)– First differences– Fixed effects (similar to company dummies)
• Both: fixed variables drop out (interactions remain)
• Effect on model results??
What do we hope to be able to say about…
• What distinguishes companies able to ‘green’ production competitively?
• Under what circumstances does it pay to be green?
Using the data
Research question
Model
Right info extracted?
Appropriate variables & taxonomies created?
Good proxies for… Environmental performance ? Practices ? Capabilities
Using the model
Research question
Data
Exploiting the data?
Getting at the issues?
E.g., can we model kinds of capabilities?
•Static, dynamic?•Fixed, time-varying?•Managerial, technological, relational?
What we hope to contribute:
• Empirically distinguish capabilities from– practices (redundant) – performance (tautological)
• Explore evolution of (kinds of) capabilities– Over what time frame ‘fixed’? – To what extent ‘fungible’?
• Suggest policy perspective on competitive greening– What’s critical?– What’s replicable?
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