A meta-analysis of cross-country context effects on the link between green product strategy and financial performance

Abstract

PurposeDecades of research offer mixed results regarding the relationship between green product strategies and corporate financial performance. On the one hand, many scholars put forward green product strategies as a source of competitive advantage and in turn enhance financial performance. On the other hand, some studies suggest the opposite – that green product strategies may encounter managerial difficulties or are too costly, consequently leading to meager, if any, financial gain. This study explores cross-country contextual differences as a contingency to resolve this inconsistency. Thus, the research question is, “Do stakeholders of a country affect the link between green product strategies and financial performance?”Design/methodology/approachUsing a meta-analytic approach, the authors examine three country-level contingencies related to stakeholders: the impact of regulatory (stringency of environmental regulators), economic (consumer economic wealth) and political conditions (democratic vs. authoritarian governments) of a country in which the effects of a green product strategy on financial performance may vary.FindingsConsistent with our predictions, the meta-analysis of 26 studies published over a 20-year period reveals that green products positively relate to financial performance in countries with lax environmental regulation, low consumer economic status and authoritarian regimes.Originality/valueThe authors applied both (natural) resource-based and resource dependence theories by focusing on the interactions between firms' internal resources/capabilities and the external resources that firms can access. By doing so, the study adds to our understanding of stakeholders as resource providers to enhance financial benefits of green product strategies and provide insight into key boundary conditions of the link.

The green conundrum

“…The general belief is that wealthier democratic countries, with wealthier populations, where there are strong environmental regulations and oversight are where green products and business strategies perform the best. Yet the findings of Kim et al (2022) show that perhaps the opposite is the case. They found that authoritarian governments boosted the financial performance of green corporations, largely through the use of targeted funding and the ability to act unilaterally to the financial benefit of local corporations.…”

“…The work of Kim et al (2022) has looked at the impacts of stringent environmental regulators and regulations, consumer economic wealth, and democratic vs. authoritarian governments on the financial performance of green products and business strategies. The general belief is that wealthier democratic countries, with wealthier populations, where there are strong environmental regulations and oversight are where green products and business strategies perform the best.…”

Developing climate neutrality among supply chain members in metal and mining industry: natural resource-based view perspective

“…Thus, NRBV provides a broader perspective by incorporating natural resources and environmental factors. It highlights how natural resources, which are integral to M&M companies' business, can provide both competitive advantage and addressal of environmental issues (Kim et al. , 2020).…”

“…NRBV can help us understand how natural resources can drive both environmental challenges and competitive opportunities for firms in this sector (Menguc and Ozanne, 2005). By applying NRBV, we can gain valuable insights regarding the implementation of climate neutrality practices and the dynamics within the supply chain (Kim et al. , 2020).…”

The impact of green innovation on sustainability and financial performance: Evidence from the Jordanian financial sector

“…According to the stakeholder theory, improving FP can result from efforts related to sustainability (Wahba, 2008). One of the management's goals in engaging sustainability initiatives may be to improve FP by luring stakeholders like customers, suppliers, and consumers to transact with the business (Al Amosh & Khatib, 2023) governments and staff (Kim et al, 2023; Menicucci & Paolucci, 2023). Introducing and applying the stakeholder theory is an effort to capture and analyze the larger context in which numerous interested parties are active.…”