Green by Affiliation? Ownership Identity and Environmental Management System Adoption in Chinese Business Groups

Abstract

How does owner identity affect environmental management system (EMS) adoption by business group affiliates? While current research on EMS adoption is mostly focused on stand-alone Western firms, a marked uptake of adoption has unfolded in Eastern countries such as China, where business group affiliates are the dominant organizational form. This stark contrast between corporate interest and research attention has left a clear lacuna in our understanding of how systems that can reduce environmental impact diffuse across industrial settings. We argue that state, family, and foreign owners of affiliated firms show distinct propensities to adopt an EMS, owing to differences in legitimacy needs, ownership competencies, and group-level preferences to engage in systematic environmental practices. Logistic regressions based on data from listed Chinese business group affiliates between 2008 and 2019 show that state and family ownership negatively influence the likelihood of EMS adoption, whereas foreign control has a positive effect. More intragroup transactions exacerbate the low adoption propensity of family-owned firms. Our study contributes to the literatures on business groups and corporate environmentalism.

Heterogeneity in corporate green supply chain practice adoption: Insights from institutional fields

“…Finally, the surprising finding that ownership does not influence GSCM practice adoption provides new evidence to the literature about the link between domestic ownership and environmental practice adoption (Balasubramanian et al, 2021;Wang et al, 2023;Zhu, Cordeiro, & Sarkis, 2012). Previous findings showed that foreignnon-Chinese-owned firms were more engaged in environmentally proactive actions than Chinese firms (Zhu, Cordeiro, & Sarkis, 2012).…”

Foreign Ownership, Board of Directors, and Environmental Commitment in European International New Ventures

“…According to Eesley and Lenox (2006) and Diestre and Rajagopalan (2014), these risks may take the form of litigation, fines, and stakeholder dissatisfaction that may curtail the viability of INVs, business group affiliates, and MNEs alike. In the same vein, Wang, Heugens, and Wijen (2023) write that foreign ownership has a positive effect on business group affiliates' propensity to adopt environmental management systems. This finding is doubly pertinent as foreign investors have discretion and may choose to disengage from governance activities (Han, Ding, and Zhang 2022), such as environmental commitment.…”

“…Yet, the peculiarity of the current finding resides in the distinctive role of FO as opposed to domestic ownership. Moreover, the inherent finding suggests that FO in INVs is akin to FO in business group affiliates (Wang, Heugens, and Wijen 2023) and foreign institutional ownership (FIO) in MNEs (Ellimäki et al 2023). To quote the latter, “FIOs drive their investee firms [the MNEs] to improve environmental performance in order to reduce reputational and legal risks” (Ellimäki et al 2023, 923).…”

“…Additionally, the analysis examines the effect of INVs' environmental commitment on their export intensity. While these relationships have previously been examined in the context of multinational enterprises (Ellimäki et al 2023) and business groups (Wang, Heugens, and Wijen 2023), the context and therefore the behavior and outcomes of INVs may differ. Also, owing to the difficulty in identifying INVs, previous studies have relied on smaller samples and an inductive approach.…”

İşletme Gruplarinin Özelli̇kleri̇: Gruplara Bağli Ve Bağimsiz Fi̇rmalarin Karşilaştirilmasi

“…However, knowledge sharing (Lee, Choo & Yoon, 2016;Lee & MacMillan, 2008;Lee, MacMillan & Choe, 2010;Lee, Lee & Gaur, 2017) and social capital (Yiu, Hoskisson & Lu, 2003) impacts of affiliation have been examined to a lesser extent. Several studies focus on business group affiliated firms; however, they do not make a distinction between within group and outside group relations of affiliates (Kang & Lee, 2017;Lee, Yang & Park, 2020;Wang, Heugens & Wijen, 2023).…”