Advancing Research on Corporate Sustainability

Friedrich and Wüstenhagen: “Leading Organizations Through the Stages of Grief: The Development of Negative Emotions Over Environmental Change”

This article makes a contribution to our understanding of managerial decision making. It inscribes itself in the tradition of research that looks at managerial cognition as a determinant of decision making and builds in particular on research that looks at emotions. Much of the existing literature on managerial cognition has concentrated on how issues are perceived as risk, threat, or opportunity (Chattopadhyay, Glick, & Huber, 2001; Dutton & Jackson, 1987; Staw, Sandelands, & Dutton, 1981). In their article, the authors focus on emotions, that is, a strong reaction to a decisive event, and in particular on the very strong emotion of grief, that is, an emotion triggered by a perceived irreversible loss. Up to this point, most of the literature on emotions has been published in the fields of psychology and sociology, and the application in a management context appears to be particularly promising.

The article uses the model of five stages of grief by Kübler-Ross (1969), which distinguishes between the stages of grief that a bereaved goes through. Most existing studies focus on particular emotional states. Very few studies acknowledge the astatic nature of emotions over time. By looking at how emotions change over time, this article makes another important contribution to our understanding of management decision making.

In their article, Friedrich and Wüstenhagen hypothesize about the reaction of managers to perceived significant changes and losses. They argue that managers’ perception of decisive events is not static but that their perception changes over time. Kübler-Ross (1969) distinguishes between the phases of denial, anger, bargaining, depression, and acceptance that people go through subsequently when facing an irretrievable or impeding loss. Friedrich and Wüstenhagen argue that managers go through the same phases when faced with decisive sustainability events. They use the reaction of top managers of German utilities to the nuclear phase-out in Germany in reaction to the 2011 Fukushima disaster to illustrate their argument. Germany’s decision to phase out nuclear energy after the Fukushima disaster and thus the death of an existing technology accelerated a long-term trend in Germany forcing utility companies to reinvent their corporate strategy.

As the article shows, managers’ first reaction was denial. During this phase, managers argued that it was impossible to phase out nuclear energy and that similar accidents occurring in Germany was impossible. In the following phase of anger, managers’ arguments criticized alternative concepts. During the bargaining phase, managers became more constructive using “yes, but . . .” arguments. The subsequent depression phase was characterized by the industry painting a bleak picture of the future of their industry. During the final phase of acceptance, managers’ statements reflect an attitude of acknowledging the new realities.

Friedrich and Wüstenhagen argue that the different phases also lead to different levels of passive or reactive and positive or proactive reactions of top managers and thus the industry. They hypothesize, for example, that reactions are passive during the phase of denial and more positive but not yet solution oriented during the anger phase. They propose that to really change and prepare the organization for the new realities, top managers must reach the level of acceptance.

The article provides several interesting avenues for future research. The intuitive appeal of the underlying idea will have to be empirically tested in future research. There is the general question whether top managers actually grieve over the loss of a technology or a market, that is, whether grieve is the most appropriate emotional concept to capture the cognition of managers in this context. If confirmed, it will be interesting to find out whether managers follow a fixed sequence of emotions and whether the sequence proposed by Kübler-Ross (1969) adequately describes this sequence.

A number of interesting questions arise, if a grieving sequence is confirmed. Different stages are likely to be linked to different reactions as hypothesized by the authors. This raises the question about the optimum timing of activities to change the organization. At the same time, an interesting question is what could be done to accelerate or slow the passage from one stage to the next. The literature on and practice of dealing with grief and bereavement, such as bereavement counseling, can provide additional interesting insights here. Further research can clarify the role that consultants can have in organizational restructuring when companies and managers face existential challenges. Their role could go beyond helping managers to solve technical problems but extend to managing how they deal with the emotions of an irreversible loss.

Another interesting research avenue would be to link the personal characteristics of managers to the five stages of grief. In this context, a particularly insightful research question would be to find out whether all managers go through all five stages and whether different managers remain for different periods of time in each stage. In terms of practical implications, such future research could help to understand whether some managers are better suited to manage existential crises than other managers.

Sustainability is likely to confront companies with significant structural changes, disrupting existing business practices and provoking feelings of irreversible loss. The research presented in this article and the future research can help us to understand how managers and companies say good-bye to unsustainable practices that are very dear to them.

Poldner, Shrivastava, and Branzei: “Embodied Multi-Discursivity: An Aesthetic Process Approach to Sustainable Entrepreneurship”

This article promises to offer a better understanding of the sustainable entrepreneurship process. The authors adopt a discourse-analytical perspective (Hardy, 2001; Phillips & Hardy, 2002) to make a conceptual and a methodological contribution to the literature on sustainable entrepreneurship. Conceptually, they assert that the extant literature on sustainable entrepreneurship focuses on a dichotomy between a business discourse and a sustainability discourse (Dean & McMullen, 2007; Hockerts & Wüstenhagen, 2010). However, the authors argue that sustainable entrepreneurship entails multiple discourses around which entrepreneurs build their venture. They, therefore, propose that adopting a multi-discursivity perspective that allows to unearth multiple discursive processes and the tensions between these offers a better understanding of the sustainability entrepreneurship process. Methodologically, they propose to complement discourse analysis with aesthetic inquiry to capture the complex, value-laden, and emotionally charged processes of sustainable entrepreneurship. They develop and apply their conceptual and methodological argument in a qualitative study of 58 entrepreneurial ventures from the ethical fashion industry.

Recently, entrepreneurship scholars have suggested that the inquiry of entrepreneurship processes should go beyond rational and cognitive approaches and include sensory, corporal, and emotional perceptions of reality in organizations (Hjorth & Steyaert, 2009). Such an aesthetic inquiry complements insights from conventional text-based inquiry and discourse analysis and includes non-text artifacts, such as human bodies and other non-linguistic experiences. Given the complex and value-laden nature of the concept of sustainability, such an aesthetic view on sustainable entrepreneurship appears particularly fruitful to better understand the diverse aspects that shape entrepreneurial processes in the context of sustainability. The authors propose the notion of embodied multi-discursivity to capture the variety of discourses that are manifest in text, objects, and practices that together constitute sustainable entrepreneurship processes. For this purpose, they suggest to complement discourse analysis with aesthetic inquiry. They argue that the interplay of and tensions between different discourses of sustainable entrepreneurship can be better understood when sensory, corporal, and emotional aspects of entrepreneurs and their ventures are part of the analysis.

Methodologically, this embodied multi-discursivity perspective results in an enrichment of “traditional” qualitative methods, that is, a qualitative analysis of non-textual discourses that are embodied in artifacts and corporal enactment. The authors thus suggest complementing text-based qualitative discourse analysis of the sustainable entrepreneurship process with the analysis of non-text observations such as impressions, emotions, and experiences-based photos, videos, and performance. They apply this methodology to the analysis of sustainable entrepreneurship processes in the ethical fashion industry. In a longitudinal setting, they observed and video interviewed ethical fashion entrepreneurs and designers in different environments (at fashion fares as well as in ateliers). The aim of the study was to gain insights into the different discourses that underlie the entrepreneurial process in the eco-fashion industry.

The findings of the study reveal five discourses and related practices that play a major role in ethical fashion venturing. The social discourse reflects the interactions of entrepreneurs with other individuals, groups, and communities. The ecological discourse expresses how entrepreneurs interact with the natural environment and how they interpret their dependence on natural resources. The business discourse refers to the way entrepreneurs perceive and use economic constraints and abilities to build their venture. The emotive discourse reflects emotional expressions of the personal values of the entrepreneurs. The aesthetic discourse entails practices that refer to the creation and appreciation of beauty. The authors underpin each discourse with three representative practices and illustrate these with examples from their observations in the ethical fashion industry.

Through their observations of the entrepreneurs, the authors are able to identify which discourses dominate in different entrepreneurial ventures and whether there are tensions between these different discourses. At the second stage of the analysis and based on these insights, the authors identify three barriers to multi-discursivity in sustainable entrepreneurial processes. The first obstacle, discourse exclusivity, refers to entrepreneurs who concentrate on one single discourse and neglect others. The authors argue that entrepreneurs with such a singular focus on one discourse are more disposed to failure, because they do not respond to the multiple aspects of sustainable ventures. The second obstacle, duality trap, refers to situations where entrepreneurs get stuck in the conflict between two specific discourses. Here, entrepreneurial ventures are reduced to dualities between business versus ecology or aesthetics versus social aspects. As a result, entrepreneurs do not respond to the full variety of discourses that constitute their ventures. The third obstacle, limited enactment, does not refer to tensions between different discourses but to the degree to which entrepreneurs engage in a discourse through their expressions, performance, and practices. The authors argue that through a lack of enactment, entrepreneurs risk to disconnect with stakeholders that favor certain discourses.

The embodied multi-discursive perspective offers richer insights into the nature of sustainable entrepreneurship processes. One important aspect of this perspective is that it explicitly takes into account emotion, interpretation, and subjectivity and can make researchers and entrepreneurs alike more aware of the importance of different discourses and the tensions that exist between these. This richer perspective on entrepreneurship processes appears particularly relevant in the context of sustainability, given the value-laden and emotive nature of the motives behind many sustainable ventures. Opening the qualitative analysis of sustainable entrepreneurial processes to aesthetic inquiry provides a promising avenue to capture a richer and more comprehensive picture of these processes. At the same time, embodied multi-discursivity brings up a number of questions for future research. Future studies could explore whether the five discourses that the authors identified are specific to entrepreneurial ventures in the ethical fashion industry or whether these represent generic discourses for a wider set of (sustainable) entrepreneurial processes. Closely related, there is the question on the relative importance of the five discourses for success sustainable ventures. Does a successful sustainable entrepreneur necessarily adhere to all five discourses? Is there a generic hierarchy or temporal sequence of the five discourses or is their importance specific for each venture? As a consequence, are the three obstacles relevant for the success of all types of sustainable ventures? With regard to the proposed methodology, future research could validate and refine the tools for aesthetic inquiry in the qualitative study of (sustainable) entrepreneurship processes.

Slawinski, Pinkse, Busch, and Banerjee: “The Role of Short-Termism and Uncertainty Avoidance in Organizational Inaction on Climate Change: A Multi-Level Framework”

This conceptual article offers a novel perspective on organizational responses to climate change. To date, most scholars in this area have concentrated on explaining proactive organizational responses to climate change and focus on the antecedents and conditions that favor such proactive agency (Hoffman, 2005; Okereke & Russel, 2010; Pinkse & Kolk, 2009). The underlying idea is that business organizations play an important role for addressing and fighting climate change. In fact, business activities account for a considerable share of anthropogenic greenhouse gas (GHG) emissions. At the same time, companies offer productive and innovative capacities to come up with novel products and technologies without which the transition toward more climate-friendly production and consumption patterns appears highly unlikely. Hence, the interest of corporate sustainability scholars to better understand the conditions under which firms will act proactively to address climate change.

The authors challenge this view and focus on organizational inaction on climate change as their main contribution, rather than further exploring the agency of organizations in this context. When introducing inaction on climate change as a novel construct, they refer to scientific evidence on anthropogenic climate change that highlights the need to reduce the absolute level of GHG emissions. Accordingly, they define organizational inaction on climate change as the absence of effective organizational measures to achieve durable emission reductions in absolute terms. This perspective contrasts with the predominant focus on relative emission reductions as proposed by popular concepts such as eco-efficiency (Young & Tilley, 2006) but which is unlikely to results in overall reduced emissions loads (Figge et al., 2014; Holm & Englund, 2009). Rather, the emphasis on absolute emission reductions resonates with recent voices in the corporate sustainability literature that call for taking into account ecological boundaries in the analysis of organizational conduct vis-à-vis sustainability challenges (Whiteman et al., 2013; Winn & Pogutz, 2013).

In their conceptual argument, the authors propose a multilevel framework to explain why organizations do not take effective action to address climate change. They draw on uncertainty and time orientation to theorize under which conditions organizations will be particularly disposed to inaction on climate change. The basic argument builds on three distinct propositions that explain how factors around short-termism and uncertainty that act at individual, organizational, and institutional levels induce inaction of firms. At the individual level, the authors build their reasoning on theories from psychology on managers’ time orientation and tolerance for uncertainty. They argue that managers with a present-time orientation and a low tolerance for uncertainty are more likely to shy away from taking effective measures to reduce absolute emission levels, because these managers will pay less attention to long-lasting ecological impacts that have limited and uncertain effects on short-term business goals. At the organizational level, the argument suggests that organizations that use standard management practices to support decision making on climate change issues will be more disposed to inaction. Standard management practices have a short-time focus and seek to avoid uncertainty, both of which hinder the adoption of measures to reduce absolute emission levels. At the institutional level, the authors argue that time orientation and uncertainty act through institutional logics and regulatory uncertainty. They propose that the more uncertain and the more market-dominated climate policy is, the more likely organizations will be inactive on climate change.

Reflecting the multilevel nature of corporate sustainability (Starik & Rands, 1995), the second part of the article focuses on interactions of the effects of short-termism and uncertainty at the different levels. The authors argue that there is a vicious circle that pushes organizations into climate inaction, because the effects of short-termism and uncertainty at the different levels reinforce each other. At the intersection of individual and organizational levels, they expect that the effects of managerial present-time orientations and the use of standard management practices reinforce each other, especially if managers hold senior positions. Likewise, the effects of standard management practices and a dominant market logic might mutually reinforce inaction, in particular in organizations that hold a central position in a mature organizational field. Regarding the interaction between the individual level and the institutional level, the authors expect that the present-time perspective of managers and the dominant market logic will have mutually reinforcing effects on climate change, especially if managers do not have a diverse career background. These cross-level interactions underscore the value of this multilevel theorizing (Kozlowski & Klein, 2000; Rousseau, 1985) because they add considerably to the understanding of climate inaction beyond an isolated focus on single-level effects.

The reasoning on climate inaction presented by the authors brings together some of the fundamental characteristics of sustainable development, such as the need to take into account absolute ecological limitations as well as the long-term nature of many sustainability issues, to offer a shift in perspective on the role of organizational agency for addressing sustainability challenges. At the same time, the focus on organizational inaction on climate change offers a range of opportunities for future research. One question refers to the applicability of the argument around inaction to other sustainability issues, including social issues. Climate change represents a global environmental problem. Other environmental and social issues have a stronger regional focus. The authors highlight the role of decision makers’ perceptions of time for explaining organizational inaction on climate change. For other sustainability issues, however, managerial perceptions of space and place might play a comparable role. Managerial perceptions of sustainability issues based on a regional focus or the selective attention to stakeholder demands from specific markets and institutional fields might well hinder effective organizational action because there is a mismatch with the spatial focus and scale of the issue at hand. Such mismatches have been discussed in the international corporate social responsibility (CSR) literature (Barkemeyer, 2009; Kolk & Van Tulder, 2004), but less in the field of corporate sustainability. Another relevant question for future research refers to the policy and strategy implications of an inaction perspective. While the extant literature focuses on providing guidance to develop proactive organizational responses to sustainability issues, a better understanding of drivers and conditions of organizational inaction might offer novel insights into the design of organizational strategies and public policies to address sustainability challenges.

Boiral and Henri: “Is Sustainability Performance Comparable? A Study of GRI Reports of Mining Organizations”

This article adopts a new perspective on a topic that has attracted much attention in the field: sustainability reporting, the measurability and inter-firm comparability of sustainability information. Boiral and Henri propose to take a fresh look at these issues by addressing them from three different perspectives. In their article, they argue that a functionalist perspective that assumes that sustainability information is comparable dominates research. They add two more perspectives, a critical and a post-modernist perspective, to look at the transparency and measurability of corporate sustainability information. Each perspective sheds a different light on comparability issues and proposes a complimentary interpretation.

The functionalist perspective assumes that sustainability performance can be transparently measured and compared from rigorous and standardized reports. The critical perspective does not question the measurability or comparability of information in itself but rather its reliability. The reasons of non-comparability are not technical but political. The post-modernist perspective assumes that sustainability is a discursive, elusive, and non-measurable concept. Sustainability reports can therefore not describe reality and cannot be used to compare performances.

Based on a small sample of case studies of 12 sustainability reports of mining firms using the Global Reporting Initiative (GRI) guidelines, the article identifies four main sources of incomparability and disentangles the different reasons for a lack of comparability. The authors conduct a systematic, criterion-by-criterion content analysis of sustainable development reports. Based on the GRI (2005, 2006) guidelines, they develop 92 indicators linked to the sustainability performance of mining companies. For all 92 indicators, the authors analyze the information provided in the sustainability reports of the 12 companies regarding the possibility to compare sustainability performance. They assess whether the information itself was comparable between companies, whether the information allowed determining the best company regarding an indicator, and whether the indicator itself was comparable.

The article identifies four main issues in this context. First, the underlying problem is that the nature of the indicators makes them unmeasurable and unspecific. Second, the authors find that the measurements are uncomparable. Third, information is incomplete and ambiguous and as a result, fourth, reports are opaque and self-proclaimed. Boiral and Henri interpret each of the four issues identified from a functionalist, a critical, and a post-modernist perspective. The unmeasurable and unspecific nature of the indicators is, for example, mainly due to the qualitative nature of many GRI indicators. A functionalist perspective will identify a lack of quantitative indicators, a critical perspective the vague definition of sustainability, and a post-modernist perspective the impossibility to represent sustainability through simple and unidimensional indicators as a source for this problem.

By looking at the phenomenon of poor comparability of corporate sustainability information from three different perspectives, the authors go beyond diagnosing the problem of poor comparability and make a step toward explaining the problem. Their analysis unveils the complexity behind comparability issues in corporate sustainability reporting. The findings put into question overly simplistic solutions, such as calling for standardization and quantification (Dando & Swift, 2003; KPMG, 2011), to enhance comparability. Rather their analysis can, for example, help to better understand phenomena like why reporting quality does not improve over time (Comyns, 2013).

Future research should, on the one hand, focus on further exploring empirically the comparability of sustainability information from a functional, critical, and post-modernist perspective. Different sectors, cross-sector and cross-temporal comparisons, would be particularly valuable in this context. On the other hand, future research faces the challenge to combine the insights of functional, critical, and post-modern research, for example, into corporate sustainability reporting and assessment. This combining can help to answer questions such as the following: Do we understand less about corporate sustainability performance when reporting allows us to better compare sustainability performance? Put in more general terms, is there a trade-off between comparing and understanding and explaining corporate sustainability performance?

The distinction between the three perspectives can also be fruitfully linked to research on sensemaking (Thomas, Clark, & Gioia, 1993; Walsh, 1995). Each perspective represents a different view on the same issue and results in different scanning for, interpretation of, and responses to the same information on corporate sustainability information. Better understanding the three perspectives can therefore help to better comprehend managerial decision making on sustainability.

With their contribution, Boiral and Henri go beyond the question whether corporate sustainability information is comparable. They help the readers understand the reasons for a lack of comparability and plant the seed for future research that might let researchers doubt whether comparability of sustainability information is something research should even aim for.

Delmas and Lessem: “Eco-Premium or Eco-Penalty? Eco-Labels and Quality in the Organic Wine Market”

With their article, Delmas and Lessem contribute to the growing literature on information disclosure as an environmental policy tool, by showing that publicly disclosing eco-attributes may not be sufficient to overcome the information asymmetry over these attributes between producers and consumers. Specifically, the article investigates consumer responses to two different eco-labels in the wine market to understand the interaction between the signal sent by the eco-label and other product attributes such as quality and price. The results confirm that the eco-labels may influence consumer decisions, but their potential is limited and may even generate acceptance problems for environmental products in specific circumstances.

Delmas and Lessem use an experiment including a series of choices made by 830 participants, where the participants selected between hypothetically purchasing one of four graphical representations of wine bottles or nothing. This methodology allowed the authors to randomly vary wine attributes, price and eco-label, thereby revealing the full range of consumer preferences. The results found that respondents preferred eco-labeled wines when the price was lower and the wine was from a lower quality region. However, these relative preferences were reversed if the wine was expensive and from a higher quality region.

The results of the experiment suggest that there are favorable as well as unfavorable effects of eco-labels in this industry. On one hand, the results indicate that if respondents make no inferences over wine quality, they prefer eco-labeled wine over an otherwise identical but non-eco-labeled wine, regardless of other attributes. One interpretation of these results is that when respondents have already inferred from price and other attributes that a wine is of lower quality, then the consumers might want to receive at least “the warm glow” of eco-consumption. On the other hand, the findings show that as price and other quality signals increase, the quality signal of eco-labels becomes more pertinent and outweighs “the warm glow” of eco-consumption, shifting preferences toward non-eco-labeled wine.

The authors suggest that the eco-quality penalty linked to the eco-labels is always relevant in the wine industry, although it should only apply to the eco-label associated with quality concerns. A different interpretation might be that the eco-quality premium is only relevant when other core quality attributes of products in the wine industry are absent (preferring eco-labeled products when region and prices do not suggest quality and avoiding unnecessary risks when region and prices are already good).

This article is particularly interesting for at least three different reasons: its contribution to the information disclosure literature, the methodology used, and the practical implications that follow from the study. First, information disclosure policies are increasingly gaining prominence as a “new tool” in environmental management policies (Dietz & Stern, 2002). These policies augment or replace government regulation by publicly providing information that will presumably assist more cost-effective private and legal forces (Delmas, Montes-Sancho, & Shimshack, 2010). Environmental information disclosure policies can be instituted at the firm, the product, or the consumer level. The results of this article show trade-offs in voluntary environmental initiatives and indirectly extend the previous literature highlighting the importance of keeping appropriate levels of regulatory coercion to complement any voluntary environmental initiatives by firms and industries (A. A. Marcus, Aragón-Correa, & Pinkse, 2011).

Second, regarding the methodological contribution, the authors run a discrete choice experiment over eco-labeled and non-eco-labeled wine to investigate circumstances where eco-labels may send insufficient or undesired information to consumers. The experiments are still relatively rare in the field of research on corporate sustainability, but they allow for an analysis of very specific dimensions, rather than the global and confusing analysis of dimensions circumscribed by existing market choices. These experiments are particularly useful to provide a credible context for environmental research regarding managerial approaches and consumer decisions.

Third, regarding the practical implications, eco-labeled products are often associated with a price premium to compensate the additional costs associated with the environmental and social improvements of the products: Consumers need to be willing to pay for this environmental premium for the eco-label to thrive (Reinhardt, 1998). However, the findings of this study present a valuable lesson for practitioners and policy makers who utilize and frame information disclosure policies. They will have to work with producers and marketers to ensure that eco-labels provide information that clearly communicate their value to consumers.

Finally, this study suggests relevant lines for future research. While scholars in the management literature have recognized the importance of market pressures as a driver of the adoption of innovative environmental management practices by firms, there is limited research in the management literature on how managers use information about green practices and how they could communicate their environmental attributes to relevant stakeholders. The very specific field of eco-labels also deserves additional scrutiny in future research. The number of eco-labels has exponentially grown over the last decade, which might suggest that eco-labels are successful and attractive for consumers and practitioners. However, the problems of competing and confusing eco-labels present in multiple industries (e.g., the wine industry, the food industry, and the hospitality industry) may become pervasive. It is unclear whether eco-labels reinforce each other in “greening” the market or whether the existence of competing eco-labels creates confusion that may discredit eco-labels as a whole. In this context, future studies could analyze how confusion around eco-labels may be avoided and envisage novel, collaborative approaches to address this problem.

Bermúdez-Edo, Hurtado-Torres, and Ortiz de Mandojana: “The Influence of International Scope on the Relationship Between Patented Environmental Innovations and Firm Performance”

This article offers the promise of broadening our thinking on two areas of research in corporate sustainability. The first stream argues that for a sustainability strategy to generate positive economic or financial outcomes for a firm, it needs to innovate processes, products, services, and business models. Incremental innovations or improvements will only have a marginal impact on performance. Hence, it is assumed that the greater the extent to which a firm generates environmental innovations, the higher the likelihood of positive economic outcomes for it. The second research stream relates to international scope of a firm’s environmental strategy. For example, Dowell, Hart, and Yeung (2000) found that multinational firms that adopted stringent environmental standards and innovations from their home countries generated greater shareholder value as compared with firms that pursued a race to the bottom by locating in countries with lax environmental regulations and standards. This study confirmed the Porter hypothesis (M. E. Porter & van der Linde, 1995) that argues that firms that innovate to adopt rigid environmental standards and face rigorous regulations will generate competitive advantage over firms that attempt to avoid environmental regulations and innovations.

A number of studies have addressed these questions from the perspective of examining a direct link between the development of innovation capabilities and competitive advantage (Russo & Fouts, 1997; Sharma & Vredenburg, 1998; see above for a more detailed discussion about the environmental–economic performance link) and a direct link between transfer of rigorous and advanced practices and innovations across different countries by firms and competitive advantage in a global context (Christmann & Taylor, 2006; Dowell et al., 2000).

Extant studies exploring such direct linkages have led to varying results (Margolis & Walsh, 2003). This variation is because the relationships between environmental practices and innovations and economic performance are complex and moderated and mediated by a number of variables that are internal and external to the firm. This article begins to open up this black box by digging deeper to explain one moderating variable in this relationship and offers the potential for researchers to open this question further and explore other moderating and mediating variables.

The authors begin with an argument and a hypothesis that a broader geographical scope of the exploitation of patented environmental innovations will positively moderate the relationship between the patented environmental innovations and firm financial performance. Their argument is based on the international business literature that argues that firms with a wider geographic scope or international diversification benefit from economies of scope by spreading the costs and benefits of environmental investments. Wider international diversification allows firms to access capabilities and knowledge, and deploy capabilities more widely than focusing only on the domestic market (Bartlett & Ghoshal, 1989).

The arguments presented by the authors are sound but the results are counter-intuitive. They find that decreased geographic scope increases the positive relationship between patented innovations and performance whereas increased geographic scope decreases the direct influence of patented environmental innovations on firm performance. The authors speculate that this may be because wide geographic dispersal of knowledge increases complexity beyond acceptable levels and reduces the effectiveness of communication and coordination for the efficient deployment of these innovations. The authors recommend that it may be more effective for the firm to restrict the geographic dispersal of its knowledge sourcing for environmental innovations. This is an interesting finding that challenges some fundamental assumptions of the corporate sustainability and international business literature, and raises the potential for further research to unpack this relationship.

The authors further find that a broader geographic scope for the exploitation of patented environmental innovations increases the influence of existing patents on a firm’s financial performance. The authors state that this finding is in line with previous sustainability literature that argues for the race to the top in terms of environmental practices of multinational and global firms (Christmann & Taylor, 2006; Dowell et al., 2000). They argue that broader international scope enables the firm to exploit the existing environmental patents to help generate global economies of scale and reduce national risks of fluctuations in consumer preferences and regulations, and enables the rapid deployment of technologies.

The arguments presented by the authors to explain their findings offer avenues for additional research. Are there institutional and regulatory factors within the geographic set of a firm’s international scope that could affect this relationship? Does this relationship vary by industry type? Does cultural distance of the geographic scope contribute to complexity and increased coordination? Are there local and cultural managerial factors that affect capability deployment and innovation implementation in different countries and lead to variations in performance? The findings of this study point to a broadening of a couple of old research questions that are usually treated as having been addressed. The findings offer food for thought for further research into this complex relationship.