Proactive environmental strategy and firm performance: The moderating role of corporate venturing

Proactive green strategy

A firm that adopts a PES engages in activities and initiatives that address the preservation and healing of the natural environment in a voluntary way going beyond mere compliance with regulations. It can be internally or externally oriented. An internal PES such as proactive green management focuses on a firm’s green management practices, ranging from reducing the use of and controlling the disposal of hazardous materials to reducing energy and waste to reducing the use of unsustainable materials to increasing the use of environmentally friendly technologies to preventing pollution (González-Benito and González-Benito, 2006; Sharma, 2000; Sharma and Sharma, 2011). These green management practices are proactive insofar as firms voluntarily go beyond environmental regulations and reduce negative environmental impacts by designing or altering products, processes, and operations (Aragón-Correa and Sharma, 2003). An external PES however, aims at initiating environmentally positive changes or participating in the development of environmental regulations (Aragón-Correa and Sharma, 2003; Delmas and Montes-Sancho, 2010). Aragón-Correa and Sharma (2003) argue that anticipating future regulations and social trends is an important PES approach. More specifically, Delmas et al. (2011) state that PESs include four types of activities: ‘(a) environmental reporting, (b) operational improvements, (c) organisational changes, and (d) regulatory proactivity’ (p. 119). The green strategy literature suggests that the first three types of activities fall under the umbrella of proactive green management (Shu et al., 2016), whereas the fourth suggests political influence (Hillman and Hitt, 1999; Shepherd and Patzelt, 2011). As proactive green management is internally oriented, while green political influence targets external political entities, based on these prior studies we argue that PESs can be undertaken primarily through the following two related activities and processes: proactive green management and green political influence.

A firm that adopts proactive green management engages actively in systematic activities designed to address environmental issues through environmental protection and minimise its negative environmental impacts (Dean and McMullen, 2007). When implementing proactive green management, firms may be able to exploit more green opportunities and gain competitive advantage (Dean and McMullen, 2007; Porter and Van Der Linde, 1995). More specifically, proactive green management may enhance firm performance through three green benefits. First, proactive green management enables firms to gain the advantages of market differentiation; they profit by better satisfying customer demand for green products and services with associated price premiums (Shu et al., 2016). Proactive green management also prompts innovation by encouraging the development of new environmentally friendly products from scratch (Leonidou et al., 2013: 154). Moreover, these green products or services provide firms with meaningful points of differentiation to satisfy green-conscious customers (Ambec and Lanoie, 2008). Even though customers in emerging markets are less able to afford green products (Yao et al., 2019), evidence has shown that emerging market consumers have a strong interest in consuming green products and services (Strizhakova and Coulter, 2013). For example, the Broad Group in China, Sekem in Egypt and Shree Cement in India are opting actively to use recycled materials and deploy energy-saving sustainable production processes and, as a result, these companies are capturing lucrative profits from the price premiums they command by selling green products (The Guardian, 2011).

Second, proactive green management goes beyond the standards of regulations and aims to achieve a higher standard of raw material utilisation, enhancing firm performance by reducing material costs (Ambec and Lanoie, 2008). Pollution is associated with resource waste, wherein raw materials have not been completely utilised (Porter and Van Der Linde, 1995). Proactive green management can reduce waste through enhancing the efficiency with which firms transform inputs into outputs, lowering material costs and minimising waste disposal (Ambec and Lanoie, 2008; Delmas et al., 2011; Shu et al., 2016). Moreover, the superior environmental performance that can be attributed to effective green management could help firms avoid litigation and fines associated with environmental regulations and sanctions (Lankoski, 2006), further reducing operational costs. Proactive green management as a PES could also enable firms to preemptively embrace advanced green operational practices assisting them to achieve first-mover advantages while reducing the risks and costs associated with abiding by environmental regulations (Ambec and Lanoie, 2008).

Third, proactively adopting environmentally friendly practices demonstrates a firm’s legitimacy, enhancing its image and reputation; this in turn, enhances firm performance (Aragón-Correa and Rubio-Lopez, 2007; Menguc et al., 2010; Shu et al., 2016; Vickers and Lyon, 2014). Legitimacy arising from proactive green management can, on the one hand, offer firms ready access to capital markets as they have established records of reliability and trustworthiness. On the other hand, proactive green management can enhance firm attractiveness in the labour market as job-seekers may prefer to be associated with an environmentally responsible organisation (Suchman, 1995). In addition, once a firm is deemed legitimate and reputable, it can benefit from greater acceptance of new products while reducing stakeholder uncertainty in its operations (Shu et al., 2016).

The above discussion leads us to propose our first hypothesis:

H1: Proactive green management is positively associated with firm performance.

Green political influence, as an external PES, reflects a firm’s capacity to change existing institutions and establish new ones by influencing public policy through such political processes as lobbying, public relations and involvement in legislation (Kalantaridis and Fletcher, 2012). When participating in the legislative process, firms pursue private interests and protect them by law and mandatory rules or regulations (Ahlstrom and Bruton, 2010; Pacheco et al., 2010). Based on Hillman and Hitt (1999), Shepherd and Patzelt (2011) conclude that there are three major options for firms seeking to influence the government: lobbying, financial incentives and public relations. Kalantaridis and Fletcher (2012) describe political influence as a conduit of institutional changes through the political process. In such a process, firms pursuing green political influence as a strategy negotiate with, hope to influence and encourage institutional ‘rule-makers’ to revise existing laws and/or to enact new laws, rules and regulations related to environmental protection, preservation and restoration.

In the light of these studies, we propose that green political influence lifts firm performance through green benefits such as government support and favourable policies. To implement new regulations and rules, the government usually provides supporting policies, programmes and resources; firms can proactively apply for and obtain these benefits by using their green political influence (Shu et al., 2016). For example, to support the implementation of the amended Environmental Protection Law in 2014, the Chinese State Council offered tax breaks and subsidies to adopting organisations and individuals (The Chinese State Council, 2013). As such, green benefits that are directly derived from green political influence and government support in the form of new firm-friendly environmental regulations can substantially enhance firm performance. Moreover, exerting green political influence offers frequent opportunities to interact with the government and its administrative bureau (Hillman and Hitt, 1999; Shepherd and Patzelt, 2011). This is particularly relevant to firm operations in emerging markets where the enforcement of green policies and regulations are uncertain and inadequate (Shu et al., 2016). Although the Chinese central government may consistently enhance environmental standards and launch pro-environment policies but these may be implemented selectively as, ‘local officials may be choosy about which national policies to faithfully implement and which to ignore’ (Kostka and Mol, 2013: 6). In this vein, firms operating in China face related business risks arising from the inadequate enforcement of green regulations, policies and rules (Delios and Henisz, 2003; Wang et al., 2017). To weather such uncertainties, green political influence enables firms to affect the legislation and enforcement of environment-related laws, policy and regulations in their favour (Slangen and Beugelsdijk, 2010). Thus, when green political influence efforts succeed, firms may achieve better performance. Therefore, we propose,

H2: Green political influence is positively associated with firm performance.

Although proactive green management and green political influence are two important types of PESs, they differ in several ways supporting our argument that the former is more strongly associated with firm performance than the latter. First, proactive green management improves environmental performance through internal efforts such as developing environmentally friendly new products (Aragón-Correa and Sharma, 2003; Menguc et al., 2010). Green political influence, however, seeks to protect, preserve and restore the natural environment through influencing external regulatory policy makers (Hillman and Hitt, 1999; Shepherd and Patzelt, 2011). As such, proactive green management is an internally oriented PES whereas green political influence is an externally oriented strategy that increases a firm’s reliance on the government to provide resources. Over-dependence on others may endanger a focal firm’s performance stemming from detrimental behaviours such as opportunism (Williamson, 1985). Since China has high levels of regulatory risk reflecting frequent changes in regulations and regular rotation of government officials (Wang et al., 2017), a firm’s reliance on the government for resource inputs may endanger its performance, hindering the efficacy of green political influence.

Second, proactive green management is achieved through market mechanisms, whereas green political influence is implemented through political activities. More specifically, proactive green management provides green benefits by addressing customer demand for green products/services (Menguc et al., 2010), sparking innovations (Shu et al., 2016), and promoting a firm’s reputation (Menon and Menon, 1997; Vickers and Lyon, 2014). All these activities are achieved through market-oriented mechanisms. However, the effects of green political influence are achieved through lobbying, financial incentives and public relations (Hillman and Hitt, 1999; Shepherd and Patzelt, 2011), which are government-oriented. However, as Child et al.’s (2007) study shows, changes in regulations related to environmental protection and preservation in China are challenging and more difficult to manage than market-based initiatives and improvements. As such, green political influence in China may have a weaker impact on firm performance than proactive green management has.

Finally, proactive green management is a universal practice and the related skills, experience and knowledge are applicable to other economies, whereas green political influence is context-specific and its related activities vary greatly across nations. For instance, because proactive green management is usually practised through advanced green technologies that are transferrable to multiple contexts and comply with international environmental standards such as ISO 14001 (Morrow and Rondinelli, 2002), a firm’s green management practices in its home country are often applicable to other national contexts. The benefits of green political influence depend however on unique systems of politics and administration (Zahra and Hayton, 2008), which makes the activities through which firms attempt to exert green political influence context-specific and less valuable in other regional and national contexts. As such, proactive green management may become more important than green political influence in enhancing performance.

H3: Proactive green management is more strongly associated than green political influence with firm performance.

Corporate venturing

Corporate venturing involves the creation of new business organisations by an existing company (Sharma and Chrisman, 1999) and has been recognised as an important source of firm success (Zahra, 1991) in so far as it serves as a vital engine for entrepreneurial growth (McGrath et al., 2006) and alters a firm’s competitive profile (Calabrò et al., 2016). Meanwhile, venturing also offers firms opportunities to acquire novel information, new resources and more advanced technologies (Gerschewski et al., 2018; Harrison and Leitch, 2005; Yang et al., 2019a). Prior studies distinguish between domestic venturing and international venturing according to the geographical locations in which new business-creation activities take place (Baum et al., 2013; Calabrò et al., 2016; McDougall et al., 2003).

This study suggests that the differentiation between domestic and international venturing is theoretically meaningful and practically relevant because these two types of entrepreneurial activities differ significantly in the following ways. First, international venturing is a broader and more aggressive market-based corporate strategy than domestic venturing, which has a narrower strategic scope (Calabrò et al., 2016; Karafyllia and Zucchella, 2017). When venturing across national borders, firms usually have to serve a more diverse customer base by offering a richer bundle of market offerings through collaborating with a broader range of suppliers and distributors. As such, international venturing requires firms to be more versatile through more active knowledge creation and acquisition (Calabrò et al., 2016). Second, international venturing and domestic venturing occurs in distinct contexts. Venturing domestically involves business operations and partnering activities facilitated by ‘a common language, common (national) value systems, and cultural frameworks’ (Calabrò et al., 2016: 13; Keil, 2004). International venturing, however, exposes firms to distinct cultures, markets and systems of innovation (Karami and Tang, 2019; Zahra and Hayton, 2008).

Such differences between domestic and international venturing may moderate the effects of PES on firm performance in distinct ways. As such, we suggest that, in particular, international venturing has a stronger moderating effect than that of domestic venturing on the relationship between proactive green management and firm performance. Compared with domestic venturing, international venturing provides access to broader markets in which to apply the experience, knowledge and skills related to proactive green management, enhancing the positive effects of such on firm performance. As proactive green management practices are usually undertaken through advanced green technologies, the skills, experience and knowledge developed from such practices are readily applicable to other contexts (Garud et al., 2007; Morrow and Rondinelli, 2002). A firm engaging in international venturing seeks to leverage their green knowledge, skills and experience in broader markets (Lu and Beamish, 2001); accordingly, international venturing helps firms take greater advantage of their proactive green management and is more effective in improving performance.

In addition, international venturing provides firms with more opportunities to acquire novel information, new resources and more advanced technologies (Gerschewski et al., 2018; Zahra and Hayton, 2008), informing novel ways of deploying green knowledge and skills, thus enhancing the value of green management for firm performance. International venturing can therefore, offer firms access to local knowledge bases, exposure to new systems of innovation, and conduits for diverse ideas, market needs, technological development, and cultural perspectives (Karami and Tang, 2019; Zahra and Hayton, 2008). Such factors could further enhance knowledge skill bases and enable firms to be more proficient at deploying green knowledge, experience and skills. Consequently, we suggest,

H4: International venturing has a stronger positive moderating effect on the link between proactive green management and firm performance than domestic venturing does.

We also argue that domestic venturing has a stronger positive moderating effect on the relationship between green political influence and firm performance than international venturing. Unlike green management, green political influence is relatively context-specific in that firms find it difficult to transfer experience, skills and knowledge learned in a domestic market to other countries (Hillman and Hitt, 1999; Shepherd and Patzelt, 2011). For example, dealing with the Chinese government might be significantly different from dealing with that of the United States given very different political institutions, structures and mechanisms (Helmke and Levitsky, 2004). As such, lobbying, dealing with public relations and participating in the legislative process might be sharply different across national borders. In this scenario, international venturing may not be helpful for green political influence. However, the practices firms undertake to establish green political influence may be applicable to new industries and regions opened up by domestic venturing.

Furthermore, international venturing offers a focal firm a wider set of options for boosting profits (Yiu et al., 2007), making the returns from establishing green political influence at home less attractive (Sapienza et al., 2005). As international venturing ‘inevitably alters the focus of a firm’s strategic attention’ (Sapienza et al., 2005: 439), it impedes a firm’s efforts in its domestic market. Indeed, according to the attention-based view (Ocasio, 1997), international venturing may even deflect a firm’s attention and efforts from efforts to exert green political influence in the firm’s home country. Moreover, because green political influence is government-oriented, whereas international venturing operates based on market mechanisms, these types of activities may conflict and even compete for limited firm resources. In this case, international venturing may be less helpful regarding the contribution of green political influence to firm performance.

Domestic venturing, however, emphasises expanding current business activities or establishing new ones in a firm’s own national market to operate in a known legal framework with familiar suppliers, customers and competitors (Calabrò et al., 2016; Zahra et al., 2009). This can strengthen the firm’s current connections with the government, which offers the firm additional opportunities for exerting green political influence, and thereby, reaping greater benefits from doing so. Political economists also suggest that ‘local governments are biased toward local interests and are more likely to be influenced by local vested interests’ (Bardhan and Mookherjee, 2000; Jia and Mayer, 2017: 207). Venturing domestically enhances a focal firm’s concentration in its home country; the firm is thus, more likely to be favoured by the home country government (Jia and Mayer, 2017), offering more opportunities to influence government and initiate changes in, and improvements on, current environmental regulations. Firms engaged in domestic venturing are therefore, more likely to receive entry permits, policy benefits and exclusive government support, in turn enhancing performance (Jia and Mayer, 2017).

The above discussion leads us to propose the following:

H5: Domestic venturing has a stronger positive moderating effect on the link between green political influence and firm performance than international venturing does.

Sampling and data collection

We focus on PESs in China and test the research hypotheses in that context for several reasons. Along with its extremely strong economic performance over the past several decades, China has become one of the most highly polluting (and polluted) countries in the world (López et al., 2008). For example, according to a recent report assessing ambient air pollution by the World Health Organization (WHO, 2016), more than 1 million people die annually from air pollution related illness in China, making it the deadliest country in the world for outdoor air pollution. To reduce widespread pollution, China has shut down tens of thousands of factories (Nace, 2017). Chinese industries are thus, undergoing ‘a green revolution’ and green strategy has become an important consideration for firm operation (Shu et al., 2016). Meanwhile, the Chinese government regards venturing as an engine fuelling economic growth, as reflected by its ‘mass entrepreneurship and innovation’ campaign (Zhang, 2018). According to Zhang (2018), on average, 18,100 new ventures were founded in China every day in the first-half of 2018. Therefore, China offers an appropriate empirical site at which to examine PES and corporate venturing.

Our data were collected from August 2010 through January 2011. To achieve a balanced representation of firms across regions, a multistage, stratified random sampling procedure was used to accommodate China’s geographic fragmentation. First, we segmented the 31 Chinese provinces into three regions based on their 2009 GDP rankings, which were announced in 2010, the same year when the primary data were collected. Based on cost considerations, we randomly selected 500 firms in each category from company lists provided by local governments and administrative bureaus. An initial sample of 1500 firms from 23 provinces was formed, with 10 in the eastern and coastal region, seven in the middle region and six in the western region. We then solicited cooperation from these firms by using professional interviewers to place phone calls to solicit voluntary participation. Based on this effort, 490 of the 1500 sampled firms agreed to participate after being informed of the purpose of the research and our confidentiality policy.

These data were collected through structured questionnaires that were administered through on-site interviews. For each firm visited, two independent managers were asked to complete two separate surveys, Questionnaire A and Questionnaire B. The structured interviews took about one hour on average. After eliminating responses with excessive missing data, we finally obtained 303 pairs of responses, for a valid response rate of 20.2% (303/1500). Of these respondents, 47.4% were CEOs/chairs or members of top management teams, while the rest were middle-level managers. Their average work experience was about nine years, and their average tenure in their current positions was about six years. Therefore, our informants should have adequate knowledge related to the research issues.

Several methods were employed to secure and enhance data quality. First, the translation/back-translation procedure was used to ensure the validity of the Chinese versions of the questionnaires. Second, we conducted face-to-face interviews, which helped us avoid confusion and assess the suitability of the respondents. Third, we refined the wording of the measures, when needed, through in-depth interviews with 20 managers from 10 firms to ensure their relevance and clarity in the Chinese context before finalising the surveys. Fourth, to reduce social desirability bias the respondents were informed that there were no right or wrong answers and that all their answers would be kept confidential.

To check for non-response bias, we conducted two t-tests and found no statistically significant differences in firm size or age between our sample and the wider population. Two additional t-tests revealed no significant differences in firm size or age between responding and non-responding firms. Thus, non-response bias was not a serious problem, and our sample data adequately represent firms in China. Table 1 summarises the profiles of the sample firms.

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Table 1.

Profiles of the sample companies (N = 303).

Sample characteristics	Frequency	%	Sample characteristics	Frequency	%
Firm age			Regions
0–20	206	68.0	Eastern	101	33.3
21–40	45	14.9	Western	162	53.5
41–60	44	14.5	Middle	40	13.2
61–80	4	1.3
81–100	1	0.3	Annual sales (in millions of RMB)
Above 100	3	1.0	0–10	94	31.0
			10–30	55	18.2
Number of employees			30–50	19	6.2
0–50	26	8.6	50–100	20	6.6
50–100	30	9.9	More than 100	115	38.0
100–300	67	22.1
300–500	29	9.6	Industry
Above 500	151	49.8	Information technology	10	3.3
			Electronics	37	12.2
Ownership			Machine manufacturing	14	4.6
State-owned	112	37.0	Chemical engineering	176	58.1
Private	100	33.0	Aerospace	10	3.3
International joint venture	35	11.5	Food	23	7.6
Wholly foreign owned	31	1.2	Clothing	4	1.3
Others	25	8.3	Pharmaceuticals	3	1.0
			Others	26	8.6

Measures

All the measurement scales in this study were adapted from previous research and used Likert-type response categories, ranging from 1 (‘strongly disagree’) to 7 (‘strongly agree’). The measures of the focal constructs are listed in the Appendix 1.

Confirmatory factor analysis

We used confirmatory factor analyses implemented by structural equation modelling (SEM) to assess the unidimensionality and convergent validity of the reflective measures. Following Shook et al.’s (2004) recommendation, we evaluated models with three fit indices: DELTA2, the comparative fit index (CFI), and the root mean square error of approximation (RMSEA). We first ran a four-factor measurement model (with proactive green management, green political influence, domestic venturing and firm performance as variables) with all adopted scale items loaded on their respective variables. The results showed that the measurement model did not fit with the data well (χ² = 258.977, df = 110, p < .001, DELTA2 = .946, CFI = .945, RMSEA = .067). To improve measurement quality, we deleted measurement items whose standardised factor loadings were lower than .600 and reran the measurement-model analysis. The deleted measurement items are shown in the Appendix 1. The purified measurement model indicated good fit to the empirical data (χ² = 151.835, df = 95, p < .001, DELTA2 = .977, CFI = .976, RMSEA = .045). In the purified measurement model, all items loaded significantly on the constructs that they were designed to measure (see the Appendix 1), indicating convergent validity. In further support of convergent reliability, we calculated that the composite reliability of the variables and the smallest composite reliability (for domestic venturing) was .749, well above the cut-off value of .700 (Bagozzi and Yi, 1988). To examine discriminant validity, we followed Fornell and Larcker (1981) and compared the variance shared between the constructs with the average variance extracted (AVE). As we show in Table 2, the square roots of the AVE values were all greater than the zero-order correlation coefficients between all variables.

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Table 2.

Descriptive statistics and correlations (N = 303).

	1	2	3	4	5	6	7	8	9	10	11	12
1. Firm performance	0.799	0.233**	0.128*	0.206**	0.160**	−0.075	0.028	−0.081	0.077	−0.068	−0.030	−0.090
2. Proactive green management	0.234**	0.802	0.359**	0.322**	0.147*	−0.087	0.067	−0.130*	0.181**	−0.025	0.026	−0.043
3. Green political influence	0.129*	0.360**	0.756	0.296**	0.081	0.027	0.161**	0.056	−0.020	−0.144*	−0.073	0.003
4. Domestic venturing	0.207**	0.323**	0.297**	0.730	0.195**	−0.001	0.129*	−0.086	0.102	−0.067	0.016	−0.063
5. International venturing	0.161**	0.148*	0.082	0.196**	−	0.098	0.218**	−0.038	0.237**	−0.038	0.050	0.002
6. Firm age	−0.074	−0.086	0.028	0.000	0.099	−	0.511**	0.253**	−0.007	−0.009	0.099	0.287**
7. Firm size	0.028	0.067	0.162**	0.130*	0.219**	0.511**	−	0.148*	0.077	0.011	0.116*	0.195**
8. SOEs	−0.080	−0.129*	0.057	−0.085	−0.037	0.254**	0.149**	−	−0.156**	−0.169**	−0.135*	0.124*
9. High-tech industry	0.078	0.182**	−0.019	0.103	0.238**	−0.006	0.078	−0.155**	−	0.084	0.028	−0.137*
10. Manufacturing industry	−0.067	−0.024	−0.143*	−0.066	−0.037	−0.008	0.012	−0.168**	0.084	−	0.187**	0.004
11. Industry competitiveness	−0.029	0.027	−0.072	0.017	0.051	0.100	0.117*	−0.134*	0.029	0.188**	−	0.115*
12. Industry development stage	−0.089	−0.042	0.004	−0.062	0.003	0.288**	0.196**	0.125*	−0.136*	0.005	0.116*	−
13. Marker variable(Technological turbulence)	−0.020	0.206**	0.093	0.084	0.047	0.068	0.006	0.001	0.022	−0.039	−0.004	0.071
Mean	5.026	5.346	4.313	4.496	0.502	1.163	2.799	0.366	0.416	0.578	3.594	2.591
SD	1.039	0.987	1.239	1.140	0.501	0.373	0.869	0.483	0.494	0.495	0.814	0.519

AVE: average variance extracted; SD: standard deviation; SOE: state-owned enterprises.

Notes: Zero-order correlations appear below the diagonal; adjusted correlations for adjusting potential common method bias are above the diagonal; bold numbers on the diagonal show the square root of the AVE.

Significance level: *p < .05; **p < .01 (two-tailed tests).

Theoretical contributions

This study contributes to the PES literature first, by distinguishing between two important types of PESs: proactive green management and green political influence. Prior studies on PESs devote much effort to examining the choice between and the distinct roles of reactive and PESs (Delmas et al., 2011; Menguc et al., 2010). More recently, studies have begun focusing on preventing the occurrence of environmental problems at earlier stages and thus, explore specific antecedents and realised outcomes of PES (Yang et al., 2019b). However, existing studies tend to treat PES as a one-dimensional concept and few comparatively explore distinct types of PES empirically, even though firms may choose different types of PESs (Delmas et al., 2011). Different types of PESs may have different contents, work through distinct mechanisms and thus, differ in their effects on firm performance. We propose that proactive green management and green political influence can comprise a firm’s PESs but that they differ in meaningful ways: the former is internally oriented, operates based on market mechanisms and the experience, skills and knowledge it requires might be applicable to other national contexts. The latter orients a firm externally to the politics, focuses its attention on regulatory institutions and the related insights, experience, and skills might not be applicable across national borders. Empirical findings from China further suggest that market-oriented PES works better than government-oriented PES, as proactive green management plays a stronger role in driving firm performance than green political influence (Child et al., 2007).

Second, we enrich the extant literature on corporate venturing by differentiating domestic and international venturing activities and substantiating their differential moderating roles in the PES–firm performance link. Axiomatically, domestic venturing occurs in the home market, whereas international venturing activities take place abroad (Baum et al., 2013; Calabrò et al., 2016), these types of corporate venturing activities differ in other ways. More specifically, international venturing activities occurs in environments with unfamiliar legal systems, new supplier networks, unfamiliar customers and unknown rivals, so requires a broader strategic scope and a more aggressive competitive stance (Calabrò et al., 2016; Karafyllia and Zucchella, 2017; McDougall, 1989; Zahra et al., 2009). Given such differences, we confirm that international venturing has a stronger positive moderating effect on the link between proactive green management and firm performance, whereas domestic venturing has a greater positive moderating effect on the relationship between green political influence and firm performance.

Finally, our research contributes to the literature on the interface between a PES and corporate venturing by offering an integrative perspective on these two types of proactive and entrepreneurial growth activities. Our findings indicate that proactive green management is better aligned with international venturing as it provides access to more markets to apply green management knowledge and more diverse angles from to enhance its deployment. However, green political influence could be better accommodated by domestic venturing as it opens local markets in which to utilise the context-specific practices of green political influence and enhances connections with government officials, providing more opportunities to exert green political influence. This study, therefore, reveals that the impact of PESs on firm performance may not be as straightforward as explicated in the literature (McDougall, 1989; McDougall et al., 2003; Menguc et al., 2010; Shu et al., 2016, 2019b), but instead depends on the proper alignment between types of PESs and types of corporate venturing activities. As such, our study is one of few to integrate the literature on PES and corporate venturing to explicate when a particular type of PES is positive or negative for firm performance under varying conditions.

Managerial implications

This study shows that firms might engage in either, or both, of two types of activities to implement a PES and that these activities affect firm performance differentially. Proactive green management and green political influence represent distinct environmental strategies. The former is based on market mechanisms whereas the latter aims to change existing or produce new regulatory institutions. Our study reveals that proactive green management plays a stronger role in enhancing firm performance than green political influence suggesting that internally oriented and market-based green management should be preferred in the contemporary Chinese context. Our findings are consistent with recent evidence that firms increasingly practise proactive green management in China when they pursue proactive and entrepreneurial green strategies. For instance, Ant Financial, a banking subsidiary of Alibaba and a founding partner in the Green Digital Finance Alliance, proactively launched Ant Forest to prompt users to cut greenhouse gas emissions in daily life and had saved 150,000 tonnes of CO₂ by the end of January 2017 (World Economic Forum, 2018).

It is noted that organisations should be cautious when implementing a PES and venturing activities simultaneously because combining these two strategies does not always enhance performance. Our findings suggest that firms favour international venturing over domestic venturing when proactive green management is practised. The former can provide access to broader markets and promote skills, experience and knowledge acquisition, contributing to more effective implementation of and enhanced outcomes from proactive green management. In contrast, when adopting green political influence as a PES, firms should concentrate on domestic venturing as it has a stronger synergistic effect upon green political influence. Consistent with the context-specific characteristics of green political influence, domestic venturing embeds firms in familiar market contexts enhancing their connections with government administration and thereby, helping them realise the benefits of green political influence. Moreover, in contrast with international venturing, domestic venturing enhances a firm’s local concentration as it explores business opportunities in its home market, increasing the likelihood that it will see favourable policies and programmes enacted as local government is more likely to be influenced by local businesses and investors.

Limitations and future research directions

This study is not free of limitations that future studies could address. First, given its cross-sectional design, this study cannot confirm the presence of cause-and-effect relationships between the studied variables. Although we have employed stringent methods such as CMB tests to avoid endogeneity problems, we cannot assert that our study is free of endogeneity bias. Future studies using a longitudinal design that involves collecting data from multiple sources are particularly welcome as a means of corroborating our findings. Second, this study captures firm performance using a subjective measure that may harbour bias. Moreover, we measure international venturing with a dummy variable that cannot capture the effects of a PES on firm performance when the extent of international venturing varies.

Third, our data were collected in 2011, creating a concern regarding their relevance, so we conducted several validation exercises. From the practice view, as environment deterioration remains as a top concern in China and consumers and stakeholders exhibit rising expectations for green products and services, environmental responsibility becomes a source of competitive advantage and a driver of long-term success (Lee et al., 2018; Li et al., 2020). Hence, PESs have become increasingly important in China (Jiang et al., 2020; Wang et al., 2018). Moreover, we conducted a summary independent-samples t-test to compare the means of green management practices in our sample with those in recent studies such as Jiang et al. (2020), but no significant differences were found. These results suggest that our measure is valid and our data could offer insights similar to those provided in the more recent studies.

Fourth, the institution-based view of strategy posits that organisations make decisions within existing institutional environments (Peng et al., 2009). As China’s economy is fragmented and the role of government differs across regions/provinces (Sheng et al., 2011; Shu et al., 2019a), future studies could explore institutional moderating variables, such as market–government relationships or marketisation across regions in China. Finally, it would be interesting to explore the mediating mechanisms that might connect PESs and firm performance. Future studies could, for example, examine organisational factors and processes such as knowledge-creation capabilities and new-product–development activities that are involved in transforming what firms have gained from proactive green management and green political influence into enhanced performance.