Academic journal article Journal of Small Business Management

Natural Environment, Market Orientation, and Firm Innovativeness: An Organizational Life Cycle Perspective

Academic journal article Journal of Small Business Management

Natural Environment, Market Orientation, and Firm Innovativeness: An Organizational Life Cycle Perspective

Article excerpt

Drawing upon the corporate social responsibility literature, we investigate the moderating effects of the natural environment and the stage of an organization's life cycle on the market orientation to firm innovativeness relationship. Through 229 owners or chief executive officer respondents, our results establish evidence of (1) a positive linkage between market orientation and firm innovativeness; (2) natural environmental policy positively moderating the market orientation to firm innovativeness relationship; and (3) organizational life cycle negatively moderating market orientation to innovativeness. Our findings suggest ventures characterized as being early in the organizational life cycle are more likely to have a positive environmental policy toward the natural environment leading to a competitive advantage through firm innovativeness.

Introduction

Changing concerns toward the natural environment are influencing business relationships and practices (Craig and Dibrell 2006; Dibrell, Craig, and Hansen 2011; Gerrans and Hutchinson 2000; York and Venkataraman 2010). Even so, there is limited understanding as to why a firm adopts environmental management practices (Klassen 2001; Rivera-Camino 2007). Motivated by both these concerns and this limited understanding, in this study, we explore, using the corporate social responsibility (CSR) literature as our frame, previously understudied relationships among a firm's market orientation, firm's natural environmental policy, organizational life cycle, and innovativeness within the context of small to medium-sized enterprises (SMEs).

Variously referred to as corporate citizenship (Maignan, Ferrell, and Hult 1999), corporate environmentalism (Banerjee 2002), and environmental strategy (Aragon-Correa 1998; Aragon-Correa et al. 2008; Sharma and Vredenburg 1998), natural environmental policy is a CSR construct that adds to how managers orientate their firms in response to shifting societal expectations regarding firm environmental performance (Chan 2005; Hillman, Keim, and Schuler 2004). Likewise, managerial attitudes toward environmental protection are evolving as consumers are demanding greater CSR (Banerjee, Iyer, and Kashyap 2003; Menon and Menon 1997). Notably, in some instances, responses to these changed perspectives have been linked to an increase in firm's financial performance (Craig and Dibrell 2006; Russo and Fouts 1997).

In practice, therefore, this response means that companies of all sizes are participating in a variety of activities ranging from implementing environmental management systems to sustainability or environmental reporting, to philanthropic giving (Cordano and Frieze 2000; Varadarajan and Menon 1988). As firms recognize, manage, and reduce environmental impacts, evidence is mounting that they can potentially reap competitive advantages (Chen 2008; Hart 1995; Porter and van der Lind 1995; Russo and Fouts 1997), which is captured in this research vis-a-vis a firm's innovativeness.

Utilizing the CSR, organizational life cycle, and market orientation literatures, we investigate how a firm's environmental policy and stage of the organizational life cycle interact with the market orientation to firm innovativeness relationship. The CSR literature allows us to explain the construct, natural environmental policy, and to connect the concept to firm innovativeness. We then utilize the organizational life cycle and market orientation literatures first to hypothesize whether a firm's environmental policy enhances the effect of market orientation on firm innovativeness and then move to examine further whether this relationship differs dependent on the stage of organizational life. As such, our research question is as follows: How does a firm's environmental policy, in concert with market orientation, impact firm innovativeness over the life cycle of the firm? Addressing this question contributes to the SME context conversations linking similar constructs, specifically Verhees and Meulenberg (2004) and Baker and Sinkula (2009). …

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